1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a
Barnes Group Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
2
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489
U.S.A.
Tel. (860) 583-7070
[Barnes Group LOGO]
March 15, 2000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 12, 2000
The Annual Meeting of Stockholders of Barnes Group Inc. will be held at the
Country Club of Farmington, 860 Farmington Avenue, Farmington, Connecticut
06032, at 11:00 a.m. on Wednesday, April 12, 2000, for the following purposes:
1. To elect three directors for a three-year term;
2. To approve the Barnes Group Inc. Employee Stock and Ownership Program;
3. To ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for 2000; and
4. To transact any other business that lawfully may come before the meeting or
at any adjournment thereof.
Stockholders of record at the close of business on February 16, 2000 will be
entitled to vote at the meeting.
Your vote is important. Please SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN
THE ENVELOPE PROVIDED OR VOTE BY TELEPHONE AS SOON AS POSSIBLE as described in
the enclosed proxy, whether or not you plan to attend the meeting.
gates signature
Signe S. Gates
Secretary
3
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
PAGE
----
ELECTION OF DIRECTORS FOR A THREE-YEAR TERM
(PROXY PROPOSAL 1)........................................ 1
THE BOARD OF DIRECTORS AND ITS COMMITTEES................... 3
COMPENSATION OF DIRECTORS................................... 3
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS......... 4
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 5
BENEFICIAL OWNERS OF MORE THAN 5% OF SHARES................. 5
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT.... 6
COMPENSATION................................................ 9
STOCK OPTIONS............................................... 10
LONG-TERM INCENTIVE PLAN AWARDS............................. 11
PENSION PLANS............................................... 11
EMPLOYMENT AGREEMENT........................................ 13
CHANGE-IN-CONTROL AGREEMENTS................................ 14
PERFORMANCE GRAPH........................................... 15
APPROVAL OF THE PROPOSED BARNES GROUP INC. EMPLOYEE STOCK
AND OWNERSHIP PROGRAM (PROXY PROPOSAL 2).................. 15
RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT ACCOUNTANTS (PROXY PROPOSAL 3)................ 17
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING............... 17
GENERAL..................................................... 18
ANNEX I, BARNES GROUP INC. EMPLOYEE STOCK AND OWNERSHIP
PROGRAM................................................... I-1
4
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2000
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Barnes Group Inc. (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders to be held on April 12, 2000 and at any
adjournment thereof. A stockholder who signs and returns a proxy in the
accompanying form may revoke it by notifying the Secretary of the meeting in
person or in writing (including by delivery of a later dated proxy) at any time
before it is voted. This Proxy Statement and the enclosed form of proxy are
being sent to stockholders on or about March 15, 2000.
ELECTION OF DIRECTORS FOR A THREE-YEAR TERM (PROXY PROPOSAL 1)
The Board of Directors Recommends a Vote "For" All Nominees.
Three directors are nominated for election at the 2000 Annual Meeting for a
three-year term (unless any of them earlier dies, resigns or is removed, as
provided in the Company's By-Laws). Thomas O. Barnes, Gary G. Benanav and Robert
W. Fiondella are nominated for re-election to the Board of Directors for terms
expiring at the Annual Meeting in 2003. Directors are elected by a plurality of
the votes cast for Proposal 1.
Pertinent information concerning the nominees for re-election as directors and
the five directors whose terms continue after the meeting is set forth below.
Each director has been associated with his present organization for at least the
past five years unless otherwise noted. Except as expressly stated below, none
of the organizations listed as business affiliates of the directors is a
subsidiary or other affiliate of the Company.
NOMINEES FOR RE-ELECTION
THOMAS O. BARNES
Thomas O. Barnes Photo Director since 1978
Current term expires 2000
Mr. Barnes, 51, is Chairman of the Board of Directors and an
employee of the Company. From 1993 through May 1997, Mr.
Barnes also served as Senior Vice
President -- Administration. Prior to joining the Company he
was President of The Olson Brothers Company, a manufacturer
of machined metal parts.
GARY G. BENANAV
Gary G. Benanav Photo Director since 1994
Current term expires 2000
Mr. Benanav, 54, is Chairman and Chief Executive Officer of
New York Life International, Inc. and Vice Chairman of New
York Life Insurance Company. Prior to this appointment in
December 1997, he was Chief Executive Officer of Aeris
Ventures, L.L.C., a venture capital firm. From 1993 to 1996,
he was an Executive Vice President of Aetna Life and
Casualty Company. He is Chairman of the Compensation and
Management Development Committee, and a member of the Audit
Committee, and the Corporate Governance Committee. He is a
director of Express Scripts, Inc., a full-service pharmacy
benefit management company.
1
5
ROBERT W. FIONDELLA
Robert W. Fiondella Director since 1997
Photo Current term expires 2000
Mr. Fiondella, 57, is Chairman and Chief Executive Officer
of Phoenix Home Life Mutual Insurance Company, in which
position he has served since 1994. From 1992 to 2000, he
also served as President of that company. He is a member of
the Audit Committee, the Compensation and Management
Development Committee, and the Corporate Governance
Committee. He is a director of Advest Group, Inc., a
financial Investment firm; Phoenix Investment Partners, an
investment company; PXRE Corporation, a property and
casualty reinsurance company; Hilb, Rogal & Hamilton
Company, a property casualty broker; and Aberdeen Asset
Management PLC, an investment management company.
CONTINUING DIRECTORS
WILLIAM S. BRISTOW, JR.
William S. Bristow, Jr. Director since 1978
Photo Current term expires 2002
Mr. Bristow, 46, is President of W. S. Bristow & Associates,
Inc., which is engaged in small business development. From
1992 to 1995, Mr. Bristow was New England Region Manager of
Roberts Express, Inc., a provider of expedited
transportation services. He is a member of the Corporate
Governance Committee, and the Audit Committee.
ROBERT J. CALLANDER
Robert J. Callander Director since 1991
Photo Current term expires 2002
Mr. Callander, 69, is Executive in Residence at Columbia
University School of Business. He retired as Vice Chairman
of Chemical Banking Corporation in 1992. He is Chairman of
the Audit Committee, and a member of the Compensation and
Management Development Committee, and the Corporate
Governance Committee. He is a director of Omnicom Group,
Inc., an advertising holding company; and the Scudder New
Asia, Global High Income, and Korea Funds.
EDMUND M. CARPENTER
Edmund M. Carpenter Director since 1998
Photo Current term expires 2002
Mr. Carpenter, 58, became President and Chief Executive
Officer of the Company in 1998. From 1996 to 1998, he was a
Senior Managing Director of Clayton, Dubilier & Rice, Inc.,
a private equity firm. From 1988 to 1995, he was Chairman
and Chief Executive Officer of General Signal Corporation, a
manufacturer of capital equipment and instruments for the
process control, electrical, semi-conductor, and
telecommunications industries. Prior to serving with General
Signal, he was President and Chief Operating Officer of ITT
Corporation. He is a director of Campbell Soup Company; Dana
Corporation; and Texaco Inc.
2
6
GEORGE T. CARPENTER
George T. Carpenter Director since 1985
Photo Current term expires 2001
Mr. Carpenter, 59, is President of The S. Carpenter
Construction Company, which is involved in general
contracting, and The Carpenter Realty Company, which is
involved in real estate management. He is Chairman of the
Corporate Governance Committee. He is a director of Webster
Financial Corp.
FRANK E. GRZELECKI
Frank E. Grzelecki Director since 1997
Photo Current term expires 2001
Mr. Grzelecki, 62, is a Managing Director of Saugatuck
Associates, Inc., a private investment firm. He retired as
Vice Chairman of Handy & Harman, a diversified industrial
manufacturing company, in 1998. From 1992 to 1997, he served
as President and Chief Operating Officer of that company. He
is a member of the Audit Committee, and the Compensation and
Management Development Committee. He is a director of
Trenwick Group Inc., an insurance holding company.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In 1999, the Board of Directors held seven meetings. Each incumbent director of
the Company attended in excess of 80% of the meetings of the Board of Directors
and Board committees on which he served during 1999, except Mr. Fiondella who
attended 38% of such meetings. The Audit Committee is responsible for matters
relating to accounting policies and practices, financial reporting and the
internal control structure. Each year it recommends to the Board the appointment
of a firm of independent accountants to audit the financial statements of the
Company. It reviews with representatives of the independent accountants the
scope of their audit of the Company's financial statements, results of audits,
audit fees and any recommendations with respect to the internal control
structure. The Audit Committee also reviews non-audit services rendered by the
Company's independent accountants and periodically meets with or receives
reports from principal executive officers and the Internal Audit Director of the
Company. The Audit Committee held six meetings in 1999. The Compensation and
Management Development Committee (formerly known as the Compensation Committee)
administers the Company's incentive and stock plans, sets the salary of the
President and Chief Executive Officer, and reviews and approves the compensation
of the other executive officers. The Compensation and Management Development
Committee held five meetings in 1999. The Corporate Governance Committee
(formally known as the Committee on Directors) makes recommendations concerning
Board membership, functions and compensation. The Corporate Governance Committee
will consider director nominations submitted by stockholders in accordance with
the procedures described below under the caption "Stockholder Proposals for 2001
Annual Meeting." The Corporate Governance Committee held four meetings in 1999.
All of these committees are standing committees of the Board.
COMPENSATION OF DIRECTORS
The annual retainer for directors is $35,000. The fee for attending a meeting is
$1,000 ($1,500 if held outside of Connecticut or New York City), except that the
committee chairman receives an additional $500 for each meeting at which he
presides. Messrs. Barnes and E.M. Carpenter do not receive a retainer or meeting
fees for service as directors. Mr. Barnes receives $250,000 for serving as
Chairman and performing various other duties as a nonexecutive employee of the
Company. The other duties performed by Mr. Barnes include working with the
President and Chief Executive Officer to develop relationships with possible
strategic partners, participating in the process of acquiring other businesses
or entities and engaging in various operational corporate activities when
requested, chairing the Barnes
3
7
Group Foundation, serving on the NHK-Associated Spring Suspension Components
Inc. Board of Directors, and maintaining an active role in community affairs in
the Bristol and Hartford areas. In connection with her resignation from the
Board of Directors in October 1999, Donna R. Ecton was paid $84,250, including
certain expenses which she incurred. In connection with his retirement from the
Board of Directors in December 1999, Marcel P. Joseph was paid $20,000,
including certain expenses which he incurred. The grant of rights to receive
stock and the payment of dividend equivalents under the Non-Employee Director
Deferred Stock Plan are additional forms of director compensation. Under this
plan each non-employee director is granted the right to receive 6,000 shares of
Company common stock when his or her membership on the Board terminates. The
plan provides that each newly elected director will receive the same grant. The
plan also provides for the payment of dividend equivalents equal to 6,000 times
the dividend per share for each dividend payment date.(1) In addition, in 1999,
Mr. Barnes and each non-employee director were granted stock options to acquire
8,000 shares of Company common stock under the 1991 Barnes Group Stock Incentive
Plan. Under the 1991 Barnes Group Stock Incentive Plan, options become
exercisable in increments of 25% over a four-year period beginning with the
first year anniversary following the date of the grant.
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
As of January 1, 2000, the Company's directors, named executive officers, and
directors and officers as a group beneficially owned the number of shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), shown
below:
Amount and
Nature of Percent of
Name of Person Beneficial Common
or Group Ownership(2) Stock
- -------------------------------------------------------------------------------------------------
John R. Arrington.................................... 18,223 *
Thomas O. Barnes(1).................................. 616,808 3.3%
Cedric D. Beckett.................................... 45,292 *
Gary G. Benanav...................................... 12,632 *
William S. Bristow, Jr. ............................. 491,304 2.6%
Robert J. Callander.................................. 15,062 *
Leonard M. Carlucci.................................. 72,260 *
Edmund M. Carpenter.................................. 99,342 *
George T. Carpenter.................................. 157,674 *
Robert W. Fiondella.................................. 12,000 *
Frank E. Grzelecki................................... 9,000 *
Harry G. Saddock, Jr. ............................... 30,470 *
- -------------------------------------------------------------------------------------------------
Directors & officers as a group (18 persons)......... 1,733,723 9.0%
- --------------------------------------------------------------------------------
* Less than 1% of Common Stock beneficially owned.
NOTES TO THE ABOVE TABLE:
(1) Mr. Barnes became a participant in the plan when it was adopted in 1987. He
became an employee in 1993 and continues to participate in the plan.
(2) The named person or group has sole voting and investment power with respect
to the shares listed in this column, except as set forth in this Note. Mr.
Barnes has sole voting and shared investment power with respect to 327,037
shares and no voting and shared investment power with respect to 65,827
shares. Included in Mr. G.T. Carpenter's total are 136,446 shares held by
corporations through which he has voting control. Mr. Bristow has shared
voting and shared investment power with respect to 346,098 shares. The
remainder of Mr. Bristow's shares are held in a trust which he has the power
to revoke.
4
8
The shares listed for Messrs. Arrington, Barnes, Beckett, Carlucci, E.M.
Carpenter, Saddock, and the directors and officers as a group include 16,350,
42,550, 39,550, 57,795, 50,800, 19,475 and 312,025 shares, respectively, which
they have the right to acquire within 60 days after January 1, 2000. The shares
listed for Messrs. Arrington, Barnes, Beckett, Carlucci, E.M. Carpenter,
Saddock, and the directors and officers as a group also include 1,156, 4,472,
3,731, 13,204, 712, 8,719 and 70,031 shares, respectively, over which they have
voting power and limited investment power. These shares are held under the
Company's Guaranteed Stock Plan (an employee stock ownership plan). The shares
listed for Messrs. Barnes, Benanav, Bristow, Callander, G.T. Carpenter,
Fiondella and Grzelecki include 6,000 shares each that each of them have the
right to receive under the Non-Employee Director Deferred Stock Plan described
above under the heading "Compensation of Directors."
The shares listed for Messrs. Beckett, Carlucci, E.M. Carpenter, Saddock, and
the directors and officers as a group do not include 40,000, 46,500, 120,000,
16,000 and 222,500 incentive stock units, respectively, that they currently may
have the right to receive on a future date pursuant to Incentive Stock Right
Agreements.
Except for the shares under the Non-Employee Director Deferred Stock Plan, the
number of shares reported as beneficially owned has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Except for matters required to be submitted to stockholders, the Board of
Directors believes that the Company is controlled by its Board of Directors
acting as such.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that its officers and directors, and individuals who own
more than ten percent of the outstanding shares of Common Stock, have complied
in 1999 with the filing requirements of the Exchange Act, except that one report
filed on behalf of Mr. William S. Bristow concerning 12 transfers between trusts
was not timely filed.
BENEFICIAL OWNERS OF MORE THAN 5% OF SHARES
As of December 31, 1999, the individuals and institutions set forth below are
the only persons known by the Company to be beneficial owners of more than 5% of
the outstanding shares of Common Stock:
Amount and
Nature of Percent of
Name and Address Beneficial Common
of Beneficial Owner Ownership Stock
- -------------------------------------------------------------------------------------------
Mr. Wallace Barnes(1)....................................... 2,015,020 10.7%
1875 Perkins Street
Bristol, Connecticut 06010
Fleet National Bank(2,3).................................... 5,445,620 28.9%
777 Main Street
Hartford, Connecticut 06115
Gamco Investors, Inc.(4).................................... 999,025 5.3%
One Corporate Center
Rye, New York 10580
NOTES TO THE ABOVE TABLE:
(1) As of December 31, 1999, Mr. Wallace Barnes reported that he beneficially
owned 2,015,020 (10.7%) shares of Common Stock. He has sole voting and
investment power with respect to 1,156,754 shares; and sole voting power and
shared investment power with respect to 828,266 shares; and shared voting
and shared investment power with respect to 30,000 shares, which are held by
a private charitable foundation established by Mr. Barnes, as to which
shares he disclaims beneficial ownership.
5
9
(2) As of December 31, 1999, Fleet National Bank ("Fleet") reported that it was
the beneficial owner of 2,385,234 (12.7%) shares of Common Stock. Fleet
reported that it had sole voting power with respect to 481,931 shares; sole
investment power with respect to 482,917 shares; and shared investment power
with respect to 1,901,267 shares.
(3) As of December 31, 1999, Fleet reported that it held 3,060,386 (16.2%)
shares of Common Stock in its capacity as trustee for the Company's
Guaranteed Stock Plan (an employee stock ownership plan). The plan provides
that the stock shall be voted by the trustee as directed by the participants
in the plan. Fleet disclaims beneficial ownership of this stock.
(4) As of December 31, 1999, Gamco Investors, Inc. ("Gamco") reported that it
was the beneficial owner of 999,025 (5.3%) shares of Common Stock. Gamco
reported that it had sole voting and sole investment power with respect to
999,025 shares.
COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT
TO OUR FELLOW STOCKHOLDERS AT BARNES GROUP INC.:
We, the members of the Compensation and Management Development Committee of the
Board of Directors of Barnes Group Inc. are independent, non-employee directors
with no "interlocking" relationships as defined by the Securities and Exchange
Commission. We are committed to developing compensation strategies with strong
ties to stockholder value creation. When Barnes Group's stockholders
win -- through balanced, profitable, sustainable growth -- Barnes' executives
win. The overarching philosophy with respect to executive compensation,
therefore, is to deploy programs directly linked to the Company's strategic
business objectives and total stockholder return. If the Company's results
against its goals and targets are below preset performance thresholds, and if
stock price appreciation is not realized, payouts under the Company's short-term
and long-term incentive programs are reduced to zero. If, however, the Company's
results exceed preset performance targets, Barnes executives have an opportunity
to realize significant additional compensation. This high degree of performance
linkage, and the significant leverage and risk incorporated into the programs,
give Barnes Group's executive team a very strong financial incentive to provide
the balanced, profitable, sustainable growth that creates economic value and
stockholder wealth.
Barnes Group's annual strategies incorporate "stretch" operational goals. The
Company's Board of Directors has taken an active role in the determination of
these goals, and participated in the development of compensation programs
directly tied to these same goals. Our objective has been to ensure appropriate
balance between short-term and long-term incentives to encourage balanced,
profitable, sustainable growth.
During 1999, we retained independent compensation consultants to assist in the
identification of a group of comparative companies, develop competitive
compensation data for that comparison group and for general industry, and
examine the Company's current pay levels and the historical pay-for-performance
relationship. The comparison group currently consists of 21 companies of similar
size in one or more of the Company's industries. The companies chosen for the
comparison group are not necessarily the same as those represented in the stock
price performance graph accompanying this report. We believe Barnes Group's
market for executive talent extends beyond this comparison group, and the
competitive compensation levels have been determined accordingly.
The key elements of Barnes Group's executive compensation strategy are salary,
short-term incentives, and long-term incentives.
SALARIES
Executive officer salaries are established with reference to competitive levels
for positions of similar responsibility and impact. We review executive
officers' salaries at least annually. Salaries are targeted to fall within a
range of plus or minus 10% of the median competitive level for the executive
team overall. Individual
6
10
salaries may exceed or fall below that competitive range, depending on the
experiential requirements of the position and the executive's expected
contribution to the Company.
Mr. E.M. Carpenter became President and Chief Executive Officer on December 8,
1998. His annual salary, established in accordance with his Employment Agreement
dated December 8, 1998 (which is described below under the heading "Employment
Agreement"), was $550,000 for the full year 1999.
SHORT-TERM INCENTIVES
Barnes Group executives place a significant percentage of their annual cash
compensation at risk under the Management Incentive Compensation Plan ("MICP").
Award opportunities are based on the performance of the Company as a whole, the
business unit over which the executive has a direct influence, or a combination
of both. For 1999, the performance measures were earnings per share, operating
profit (less a charge for the capital employed by the applicable business unit)
and revenue. In the future, performance measures may include other measures
directly tied to stockholder value creation as we believe to be appropriate
given changes in business conditions. Target incentive amounts are established
at the start of the year for each executive, stated as a percent of salary.
Performance target, threshold, and maximum amounts are established at the start
of each operating period. The final payout is calculated based upon the
operating results attained relative to these preset performance targets. If
performance is below the threshold amounts established, the payout is reduced to
zero. If the targeted operating results are attained, the target incentive
amounts are payable. For 1999, if performance exceeded the applicable maximum
amounts, the following percent of salary was payable: 150% for the President and
Chief Executive Officer; 135% for Group Presidents; 120% for Senior Vice
Presidents; and 90% for Vice Presidents.
The full amount of the annual bonus shown on page 9 for Mr. E.M. Carpenter was
in accordance with his Employment Agreement. Future annual bonus amounts will be
determined under the MICP.
LONG-TERM INCENTIVES
We believe a substantial percentage of total compensation must be tied directly
to the creation of stockholder value. Historically, we have determined long-term
compensation based on two indicators of stockholder value creation: stock price
and economic return. The latter measure has served effectively as the basis for
the Barnes Group Inc. 1996 Long-Term Incentive Plan ("LTIP") and predecessor
plans throughout the 1990s.
Under the LTIP, the Committee has granted performance units to executive
officers. Any resulting cash payments are equal to the increase in the value of
the performance units over a three-year period. The value of a performance unit
for any single year is equal to economic return, measured as cash flow from
operations in excess of the risk-adjusted cost of equity capital, for the
current and previous four years. Awards for each three-year period are paid in
the year following the end of the period. Awards under the LTIP paid in 2000
were based on an increase in the value of performance units over the three-year
period from 1997 to 1999. Beginning January 1, 1999, Mr. E.M. Carpenter became a
participant in the LTIP in accordance with his Employment Agreement.
Beginning in 2000, we have discontinued future awards under the LTIP. Existing
LTIP cycles will continue uninterrupted, with the last three-year period ending
on December 31, 2001. We presently intend to utilize stock options as the
stand-alone vehicle for long-term incentives, to maximize the impact of stock
price appreciation on long-term compensation. Stock options incorporate a higher
level of risk than other forms of executive compensation, including the LTIP
they will supplant, and tie employees' long-term economic interests directly to
those of stockholders. No economic benefit is derived from stock options absent
stock price appreciation. These options will be granted principally under the
Employee Stock and Ownership Program, subject to stockholder approval of
Proposal No. 2. This plan allows for the use of several long-term incentive
vehicles, in addition to stock options.
Also beginning in 2000, we have instituted stock ownership guidelines under
which every executive will be expected to hold a substantial ownership stake in
the Company. Ownership will include stock owned
7
11
under the Barnes Group Inc. Guaranteed Stock Plan and Employee Stock Purchase
Plan. Restricted stock, stock options, and performance stock will be excluded
until the related stock is directly owned.
The current stock ownership guidelines that apply to the top 44 executives of
the Company worldwide are:
MULTIPLE OF
POSITION ANNUAL SALARY
- -------- -------------
President and Chief Executive Officer....................... 5x
All Other Executive Officers................................ 3x
Non-Officers................................................ 1x
We will monitor ownership levels annually. Executives subject to the ownership
guidelines are expected to make substantial progress toward the applicable
guideline, with full compliance by the end of 2004, or 5 years from date of hire
or promotion for new executives. We will, at our discretion, pay future MICP
amounts in stock if the guidelines are not met, or take other actions as we deem
appropriate at that time to ensure compliance.
The Committee currently grants stock options to executive officers and other key
employees under the 1991 Barnes Group Stock Incentive Plan ("SIP"). Except for
initial grants (which are typically awarded at 85% of market value) to certain
executive officers upon assumption of their positions, options generally have
been granted on an annual basis at the market price of the Common Stock on the
date of grant. Such options become exercisable over time.
In 1999, we granted Mr. E.M. Carpenter an option to purchase Company Stock at
100% of the then current market value, as shown on page 10. In determining the
size of the grant we considered the magnitude of grants to chief executive
officers of industrial companies of comparable size and complexity and the
importance of linking a significant part of Mr. E.M. Carpenter's total
compensation package to the future performance of the Company's stock.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
limits the Company's tax deduction to $1 million per year for compensation paid
to the President and Chief Executive Officer and each other executive officer
named in that year's proxy statement unless certain conditions are met. One of
those requirements is that compensation over $1 million annually must be based
on stockholder-approved plans. The SIP, which was approved as amended and
restated in 1996, was designed to meet these requirements. The Employee Stock
and Ownership Program is also designed to meet these requirements. As described
under Proposal No. 2, approval is being requested for the Employee Stock and
Ownership Program to qualify awards under this plan for deductibility without
limitation under the Code. Our present intention is to comply with the
requirements of Section 162(m) unless and until we determine that compliance
would not be in the best interest of the Company and its stockholders.
COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Gary G. Benanav, Chairman
Robert J. Callander
Robert W. Fiondella
Frank E. Grzelecki
8
12
COMPENSATION
The following table sets forth compensation paid by the Company to the President
and Chief Executive Officer and to the four remaining most highly-paid persons
who were executive officers at the end of 1999.
Long Term Compensation
------------------------------------
Annual Compensation Awards(3) Payouts
------------------------------- ----------------------- ----------
Other Restricted Securities All
Annual Stock Underlying Other
Compen- Awards(4) Options(5) LTIP Compen-
Name and Principal Position(1) Year Salary Bonus sation(2) ($) (#) Payouts(6) sation(7)
- ------------------------------ ---- -------- -------- --------- ---------- ---------- ---------- ---------
E.M. CARPENTER 1999 $550,000 $275,000 $60,703 $ -0- 128,200 $ -0- $ 80,860
President and Chief Executive Officer 1998 38,077 -0- 54,247 3,712,500 75,000 -0- 66,302
J.R. ARRINGTON 1999 236,108 10,035 21,515 -0- 26,400 -0- 31,035
Senior Vice President, Human Resources 1998 166,442 103,860 44,371 -0- 39,000 -0- 84,839
C.D. BECKETT 1999 249,167 2,355 43,212 -0- 57,400 -0- 80,577
Vice President, Barnes Group Inc. 1998 206,667 252,215 3,985 1,007,250 21,000 -0- 14,847
and President, Bowman Distribution 1997 141,755 92,615 3,366 -0- 42,000 -0- -0-
L.M. CARLUCCI 1999 307,038 336,686 67,633 -0- 66,300 163,191 105,901
Vice President, Barnes Group Inc. 1998 262,100 102,752 21,887 -0- 30,000 129,870 30,104
and President, Associated Spring 1997 220,500 202,965 42,161 -0- 21,600 156,020 50,424
H.G. SADDOCK, JR. 1999 178,850 161,965 4,422 -0- 10,900 -0- 14,791
Vice President, Barnes Group Inc. 1998 165,337 112,131 4,037 296,875 9,000 -0- 15,015
and Vice President Operations,
Associated Spring
NOTES TO THE ABOVE TABLE:
(1) Mr. E.M. Carpenter joined the Company in December 1998; accordingly, no
information is provided for him in 1997. Mr. Saddock became an officer in
June 1998; accordingly, no information is provided for him in 1997. Mr.
Arrington joined the Company in April 1998; accordingly, no information is
provided for him in 1997.
(2) Other annual compensation includes reimbursement for taxes paid on life
insurance premiums, financial planning services, and relocation expenditures
paid by the Company.
(3) Awards to the executives were granted under the 1991 Barnes Group Stock
Incentive Plan, except for 75,000 stock options and 60,000 incentive stock
units that were granted to Mr. E.M. Carpenter in 1998 in accordance with his
Employment Agreement (which is described below under the heading "Employment
Agreement").
(4) Messrs. Beckett, Carlucci, Saddock and E.M. Carpenter were each awarded an
incentive stock right consisting of incentive stock units in the amounts and
on the dates noted as follows: Beckett, 6,000 on 2/16/96 and 14,000 on
2/20/98; Carlucci, 23,250 on 2/16/96; Saddock, 6,000 on 2/16/96 and 2,000 on
6/1/98; and E.M. Carpenter, 60,000 on 12/8/98. Incentive stock units are
denominated in shares of Common Stock. The right awarded to each executive
(other than Mr. E.M. Carpenter) entitles the holder to receive, without
payment to the Company, shares of Common Stock equal to the number of
incentive stock units credited to the holder on the date five years from the
date of the award, provided that the holder is an employee of the Company on
that date. Units underlying these rights were credited to each executive
(other than Mr. E.M. Carpenter) as of the date of the award. The right
awarded to Mr. E.M. Carpenter entitles him to receive, without payment to
the Company, shares of Common Stock equal to the number of incentive stock
units credited to him on the third and fifth anniversary of the date of the
award. Units underlying these rights will be credited to Mr. E.M. Carpenter
on the third and fifth anniversary of the date of the award, in each case,
provided that he is an employee of the Company on such anniversary. In
addition Messrs. Beckett, Carlucci, Saddock and E.M. Carpenter were each
awarded an additional incentive stock right consisting of incentive stock
9
13
units in the amounts and on the dates noted as follows: Beckett, 20,000 on
2/20/98; Carlucci, 23,250 on 2/16/96; Saddock, 8,000 on 6/1/98; and E.M.
Carpenter, 60,000 on 12/8/98. The right awarded to each executive entitles
the holder to receive, without payment to the Company, shares of Common
Stock equal to the number of incentive stock units credited to the holder on
the date five years from the date of the award or, solely with regard to Mr.
E.M. Carpenter, on the third and fifth anniversary of the date of the
holder's award, provided that, in each case with respect to each executive,
the holder is an employee of the Company on that date and that specified
performance targets for the Company's earnings per share are met. Units
underlying these rights are credited in increments to each executive over
the term of the award in accordance with a schedule based on the attainment
by the Company of specified levels of earnings per share. Pursuant to the
terms of the awards described above, each holder is credited with dividend
equivalents on all incentive stock units credited to him based upon
dividends paid on outstanding shares of Common Stock. Such dividend
equivalents, once credited, are converted into a number of additional
incentive stock units, as of each dividend payment date, equal to the amount
of dividends that would have been paid on the number of shares of Common
Stock equal to the number of incentive stock units credited to the holder
immediately prior to the dividend payment date divided by the market price
of the Common Stock on the dividend payment date. As of December 31, 1999,
Messrs. Beckett, Carlucci, and Saddock were credited with 25,828, 41,125 and
10,558 incentive stock units, respectively, having a value at $16.31 per
share as of December 31, 1999, of $421,255, $670,749 and $172,201,
respectively.
(5) Adjusted for 3-for-1 stock split effective April 25, 1997.
(6) Payment in the designated year is with respect to the three-year performance
period ending the prior year. Thus, the payment made in 1999 covered the
three-year period ending in 1998.
(7) Includes matching contributions by the Company under the Guaranteed Stock
Plan and premiums paid for life insurance. Included in "All Other
Compensation" for Mr. Carlucci is $71,093 for the reimbursement of moving
expenses paid by the Company in 1999. Included in "All Other Compensation"
for Mr. Beckett is $64,437 for the reimbursement of moving expenses paid by
the Company in 1999.
STOCK OPTIONS
The following table provides information on grants of stock options in 1999
pursuant to the 1991 Barnes Group Stock Incentive Plan to the executive officers
listed in the Summary Compensation Table.
OPTION GRANTS IN 1999
Number of Percent of Potential Value at Assumed
Securities Total Annual Rates of Stock Price
Underlying Options Market Appreciation to End of Option
Options Granted to Exercise Price on Term in 2009(3)
Granted(2) Employees Price Date of Expiration ----------------------------------
Name (#) in 1999 ($/Sh) Grant ($/Sh) Date 0% 5% 10%
- ----------------- ---------- ---------- -------- ------------ ---------- -------- ---------- ----------
E.M. Carpenter 128,200 15.5% $19.44 $19.44 2/19/09 $ -0- $1,567,886 $3,971,636
J.R. Arrington 26,400 3.2% 19.44 19.44 2/19/09 -0- 322,872 817,872
C.D. Beckett 27,400 3.3% 19.44 19.44 2/19/09 -0- 335,102 848,852
C.D. Beckett(1) 30,000 3.6% 17.00 20.00 4/14/09 108,792 467,400 1,046,100
L.M. Carlucci 66,300 8.0% 19.44 19.44 2/19/09 -0- 810,849 2,053,974
H.G. Saddock, Jr. 10,900 1.3% 19.44 19.44 2/19/09 -0- 133,307 337,682
NOTES TO THE ABOVE TABLE:
(1) Mr. Beckett received a grant of options on April 14, 1999 in connection with
a promotion.
(2) Options become exercisable in increments of 25% over a four-year period
beginning with the first year anniversary following the date of the grant.
10
14
(3) With respect to options expiring on April 14, 2009, the stock price per
share in 2009 would be $20.00 based on 0% annual appreciation from the
market price on the date of the grant, $32.58 based on 5% annual
appreciation, and $51.87 based on 10% annual appreciation. With respect to
options expiring on February 19, 2009, the stock price per share in 2009
would be $19.44 based on 0% annual appreciation, $31.67 based on 5% annual
appreciation, and $50.42 based on 10% annual appreciation. The preceding
calculations are not intended to be a prediction by the Company of the price
of its shares in the future.
The following table provides information relating to stock option exercises in
1999 by the named executive officers and the number and value of each such
officer's unexercised in-the-money options on December 31, 1999, based on the
difference between the exercise price and the $16.31 per share year-end market
price of the Common Stock.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options Options
Shares at Fiscal Year-End(#) At Fiscal Year-End($)
Acquired on Value --------------------------- ---------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ----------- ----------- ------------- ----------- -------------
E.M. Carpenter -0- $-0- 18,750 184,450 $ -0- $-0-
J.R. Arrington -0- -0- 9,750 55,650 -0- -0-
C.D. Beckett -0- -0- 26,250 94,150 -0- -0-
L.M. Carlucci -0- -0- 28,500 99,600 56,896 -0-
H.G. Saddock, Jr. -0- -0- 14,850 19,450 63,644 -0-
LONG-TERM INCENTIVE PLAN AWARDS
The following table provides information relating to grants of performance units
in 1999 for the performance period 1999-2001 under the LTIP.
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1999
Performance or
Number of Other Period
Shares, Units Until
or Other Maturation
Name Rights(#) or Payout(1)
- ------------------ ------------- --------------
E.M. Carpenter 189,300 1999-2001
J.R. Arrington 39,000 1999-2001
C.D. Beckett 40,400 1999-2001
L.M. Carlucci 53,600 1999-2001
H.G. Saddock, Jr. 16,100 1999-2001
- ---------------
(1) Under the LTIP, there are no thresholds, targets or maximums as those terms
are used in the Securities and Exchange Commission's rules. Payments are
based on the increase in the value of performance units during the indicated
performance period. The value of a performance unit over the three-year
period ending December 31, 1999 increased by $3.39. However, this is not
necessarily representative of the increase, if any, that will occur during
the period 1999-2001. Payments under the LTIP made in the prior three years
are shown in the Summary Compensation Table.
PENSION PLANS
The following table gives examples of estimated annual retirement benefits
payable to H.G. Saddock, Jr. as though he had retired in 1999 at age 65 in
specified compensation and years of service classifications
11
15
under the Company's Salaried Retirement Income Plan, Retirement Benefit
Equalization Plan and Supplemental Executive Retirement Plan.
PENSION PLAN TABLE A
YEARS OF SERVICE
- ------------------------------------------------------------------------------
REMUNERATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------ -------- -------- -------- -------- -------- --------
$125,000 $42,968 $ 57,290 $ 71,613 $ 74,738 $ 77,863 $ 80,988
150,000 52,155 69,540 86,925 90,675 94,425 98,175
200,000 70,530 94,040 117,550 122,550 127,550 132,550
250,000 88,905 118,540 148,175 154,425 160,675 166,925
300,000 107,280 143,040 178,800 186,300 193,800 201,300
350,000 125,655 167,540 209,425 218,175 226,925 235,675
400,000 144,030 192,040 240,050 250,050 260,050 270,050
450,000 162,405 216,540 270,675 281,925 293,175 304,425
500,000 180,780 241,040 301,300 313,800 326,300 338,800
550,000 199,155 265,540 331,925 345,675 359,425 373,175
600,000 217,530 290,040 362,550 377,550 392,550 407,550
The compensation included in Pension Plan Table A in determining earnings for
retirement plan purposes includes only annual salaries as shown in the column
labeled "Salary" in the Summary Compensation Table. Benefits are computed on a
straight-life annuity. The benefits listed in the table are not subject to a
deduction for Social Security.
Messrs. E.M. Carpenter, Arrington, Beckett and Carlucci all participate in the
Company's Supplemental Senior Officer Retirement Plan. The following table gives
examples of estimated annual retirement benefits payable under the Company's
Supplemental Senior Officer Retirement Plan to each of these executive officers
as though he had retired in 1999 at age 65 in specified compensation and years
of service classifications.
PENSION PLAN TABLE B
15 or More
Remuneration Years of Service
- ------------ ----------------
$ 125,000 $ 68,750
150,000 82,500
200,000 110,000
250,000 137,500
300,000 165,000
350,000 192,500
400,000 220,000
450,000 247,500
500,000 275,000
600,000 330,000
700,000 385,000
800,000 440,000
900,000 495,000
1,000,000 550,000
1,200,000 660,000
1,300,000 715,000
The compensation included in determining earnings for the Supplemental Senior
Officer Retirement Plan includes only annual salary and bonus as shown in the
columns labeled "Salary" and "Bonus" in the
12
16
Summary Compensation Table. Benefits are computed based on a straight-life
annuity. This plan functions as an "umbrella" plan, and benefits listed in the
table above are subject to deduction for Social Security benefits, benefits
derived from other employers' pension plans and any benefits earned under the
Company's other defined benefit plans, including, without limitation, the
Salaried Retirement Income Plan, Retirement Benefit Equalization Plan, and
Supplemental Executive Retirement Plan.
Years of service as of December 31, 1999, rounded to the nearest whole year, for
the named executive officers are as follows: E.M. Carpenter, 1 year; J.R.
Arrington, 2 years; C.D. Beckett, 6 years; L.M. Carlucci, 24 years; and H.G.
Saddock, Jr., 9 years.
EMPLOYMENT AGREEMENT
On December 8, 1998, the Company entered into an employment agreement (the
"Agreement") with Mr. E.M. Carpenter under which he serves as the President and
Chief Executive Officer of the Company. The Agreement provides for Mr. E.M.
Carpenter's employment through December 31, 2001, and for automatic annual
extensions until Mr. E.M. Carpenter reaches age 65, unless either party
furnishes 90 days prior written notice that the Agreement will not be extended.
Mr. E.M. Carpenter was granted a one-time lump sum payment under the Agreement
of $100,000 as a relocation allowance, with the amount grossed up for any
applicable taxes. Mr. E.M. Carpenter also became entitled to receive
reimbursement of expenses reasonably incurred in connection with his duties and
to receive reimbursement of reasonable legal fees in connection with the
negotiation and documentation of the Agreement and the enforcement of his rights
under it. As part of the Agreement, Mr. E.M. Carpenter purchased on the open
market $1,000,000 of Common Stock.
The Agreement provides for the following compensation benefits for Mr. E.M.
Carpenter: (i) a base salary of $550,000 annually, subject to increase at the
discretion of the Board of Directors; (ii) an annual bonus pursuant to the
Company's Management Incentive Compensation Plan ("MICP"), up to a maximum of
150% of salary, with a minimum bonus of $275,000 payable for calendar year 1999
if Mr. E.M. Carpenter remains in the employ of the Company through December 1,
1999; (iii) the granting of the following securities: (a) 90,300 Long-Term
Incentive Plan ("LTIP") units, (b) options to acquire 75,000 shares of Common
Stock at an exercise price of 85% of fair market value on the date of grant, (c)
60,000 incentive stock units to acquire restricted shares of Common Stock that
will vest over a five-year period if Mr. E.M. Carpenter remains in the employ of
the Company, and (d) 60,000 incentive stock units to acquire restricted shares
of Common Stock that will vest over a five-year period if specified performance
goals are attained and Mr. E.M. Carpenter remains in the employ of the Company;
and (iv) other benefits, consisting of the payment of life insurance premiums, a
financial planning allowance, an automobile allowance, service credits under the
Company's non-qualified retirement plans, annual vacations, immediate
participation in the Company's welfare benefit plans, and country club
membership expense reimbursement.
The Agreement is subject to early termination by reason of Mr. E.M. Carpenter's
death or disability, by the Company for cause, or by either party upon 30 days
prior written notice. Upon termination, Mr. E.M. Carpenter would be entitled to
any benefits due to him under any plan, program or policy of the Company which
provides benefits after termination, other than any severance pay or salary
continuation plan. In addition, if Mr. E.M. Carpenter's employment were
terminated without cause or good reason, he would be entitled to continue
receiving his salary and welfare plan benefits for a severance period extending
through the end of the remaining employment period or two years, whichever is
longer. He also would receive other benefits, including the payment of his
target bonus under the MICP, continued vesting of his stock options and
incentive stock units, continued service credits under the Company's
non-qualified plans through the end of the severance period, and full payment of
the amount owed pursuant to his LTIP awards if applicable performance goals were
achieved. Payments to Mr. E.M. Carpenter would be subject to reduction under
certain circumstances if necessary to avoid imposition of the golden parachute
excise tax. In the event Mr. E.M. Carpenter were to terminate his employment
without good reason and accept a comparable position with a company of equal or
larger size during the employment period, he would be obliged to pay the Company
$500,000 in cash. For a period of two years following
13
17
termination for any reason, Mr. E.M. Carpenter would be obliged not to compete
with the Company or disparage it.
Readers desiring more complete information may examine the Agreement, which has
been filed as an exhibit to the Company's Form 10-K for the Fiscal Year Ended
December 31, 1998 and is incorporated by reference into this document in its
entirety.
CHANGE-IN-CONTROL AGREEMENTS
The Company has entered into change-in-control severance agreements (the "CIC
Agreements") with Mr. E.M. Carpenter and each named executive officer as of the
following effective dates: E.M. Carpenter, December 8, 1998; J.R. Arrington, May
15, 1998; C.D. Beckett, December 9, 1997; L.M. Carlucci, October 17, 1997; and,
H.G. Saddock, Jr., June 1, 1998. Each of the CIC Agreements has an initial term
which ended on December 31, 1999, with automatic annual extensions commencing on
January 1, 1999 and each January 1 thereafter, unless the Company or the
executive provides written notice not later than September 30 of the preceding
year of a determination not to extend the agreement. In the event of a
"change-in-control" (as defined in the CIC Agreements), an executive who is
incapacitated would be entitled to receive full salary and employment benefits
(less any amounts received under the Company's long term disability plan) until
terminated for reasons of disability. An executive who is not incapacitated but
is terminated for any reason after a change-in-control would be entitled to
receive full salary and benefits through the date of termination, as well as
normal post-termination compensation and benefits under the Company's
compensation and benefit plans. In addition, such an executive would be entitled
to receive a lump sum cash payment equal to the target award under the LTIP that
is pro-rated to cover the portion of the award cycle in which the person was
employed.
An executive who is terminated following a change-in-control other than for
cause or by reason of death, disability or voluntary termination, would be
entitled to severance payments and benefits. These would consist of (i) a cash
payment equal to a multiple (3 times in the case of Mr. E.M. Carpenter, 2 times
for each other executive) of the executive's most recent base salary and average
annual bonus (as defined); (ii) continuation of participation in the Company's
pension and welfare benefit plans for a number of months (36 or 24)
corresponding to the multiple in (i), with the benefits reduced to the extent
the executive subsequently receives coverage elsewhere; and (iii) a cash payment
equal to the target award to which the executive would have been entitled under
the Company's incentive compensation plans (other than the LTIP) to the date of
termination (less any pro rata bonus previously paid for the same period). In
addition, upon the occurrence of a change-in-control, (a) the executive would
receive pro rata target awards under the LTIP, as if fully vested, and under the
Company's other incentive compensation plans; (b) the executive's options to
acquire Company stock would vest and become exercisable; and (c) all
restrictions on the executive's stock-based awards would lapse. Payments to the
executive would be subject to reduction under certain circumstances if necessary
to avoid imposition of the golden parachute excise tax.
Readers desiring more complete information may examine the CIC Agreement of Mr.
Carpenter, which has been filed as an exhibit to the Company's Form 10-K for the
Fiscal Year Ended December 31, 1998 and is incorporated by reference into this
document in its entirety.
14
18
PERFORMANCE GRAPH
A stock performance graph based on cumulative total returns (price change plus
reinvested dividends) for $100 invested on December 31, 1994 is set forth below.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN OF BARNES GROUP INC.,
THE S&P 500 INDEX, THE S&P MANUFACTURING (INDUSTRIAL DIVERSIFIED) INDEX,
THE S&P 600 INDEX, AND THE RUSSELL 2000
PERFORMANCE GRAPH
BGI S&P 500 S&P MANUF. S&P 600 RUSSELL 2000
--- ------- ---------- ------- ------------
1994 100 100 100 100 100
1995 98.5 134.1 138.6 128.6 126.2
1996 170.2 166.3 185.9 156.5 144.8
1997 198.6 225.5 258.6 197.9 174.6
1998 216.7 289.9 317.2 195.3 168.5
1999 151.7 350.9 355.3 219.6 201.6
The S&P 600 and Russell 2000 indexes have been added to the Performance Graph.
The Company is a member of these indexes. Next year, the Performance Graph will
not include the S&P 500 and S&P Manufacturing (Industrial Diversified) Indexes.
The Company is not a member of these indexes.
APPROVAL OF THE PROPOSED BARNES GROUP INC. EMPLOYEE STOCK AND OWNERSHIP PROGRAM
(PROXY PROPOSAL 2)
The Board of Directors Recommends a Vote "For" This Proposal.
INTRODUCTION
The purpose of the Barnes Group Inc. Employee Stock and Ownership Program (the
"Plan") is to provide a means through which the Company may attract able persons
to provide services to, or enter into and remain in the employ of, the Company.
The Company believes that the Plan will achieve this goal through providing a
program pursuant to which such persons can acquire and maintain ownership of the
Common Stock and thereby strengthen their commitment to the welfare of the
Company.
The Board has unanimously approved the Plan and the reservation of 2,500,000
shares of Common Stock for issuance pursuant to the Plan, subject to the
approval of the stockholders of the Company at the Annual Meeting.
15
19
SUMMARY OF PROVISIONS OF THE PLAN
THE FOLLOWING SUMMARY OF THE PLAN IS QUALIFIED IN ITS ENTIRETY BY THE TERMS OF
THE PLAN, A COPY OF WHICH IS ATTACHED AS ANNEX I TO THIS PROXY STATEMENT.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The Plan authorizes the grant of
options to purchase Common Stock which may be either:
- options that are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (which may
only be granted to eligible persons who are employees of the Company), or
- non-qualified stock options.
The Plan also authorizes the grant of stock appreciation rights. Each option or
stock appreciation right granted pursuant to the Plan must have an exercise
price that is no less than the fair market value per share of Common Stock
underlying such option or stock appreciation right at the time of the grant (or
no less than 110% of the fair market value in the case of incentive stock
options that are granted to participants who are holders of more than 10% of the
Common Stock). Options or stock appreciation rights granted under the Plan may
be exercisable at any time from and after the participant's first year of
service. The expiration date of options and stock appreciation rights may occur
at any time up to and including the date that is ten years from the date of
grant (or five years in the case of incentive stock options that are granted to
participants who are holders of more than 10% of the Common Stock). In addition,
incentive stock options granted under the Plan are required to expire on the
date that is three months after any termination of employment of the participant
(if such date is earlier than the normal expiration of the option).
PERFORMANCE AWARDS. Performance awards which are based on performance goals of
the Company are also authorized by the Plan. The performance goals are typically
financial objectives of the Company, and are determined on an individual
participant basis or with respect to categories of participants in the Plan. The
performance awards are payable in stock or cash, and are determined at the end
of each performance award period based on the Company's performance and the
corresponding level of performance award, if any.
RESTRICTED STOCK AWARDS. The Plan also authorizes restricted stock awards
pursuant to which eligible persons may receive grants of Common Stock which vest
at the end of a restricted period. The Plan provides that the restricted period
will generally be at least three years, but allows for vesting in as little as
one year if performance goals are met with respect to the restricted stock. In
the event that a participant's employment or services are terminated prior to
the termination of a restricted period, such participant's restricted stock will
generally be forfeited to the Company.
GENERAL LIMITATIONS. The total number of shares of Common Stock that may be
subject to awards under the Plan (including stock appreciation rights) is
2,500,000. The Plan provides that no more than 25% of this total number of
shares may be available for grants of restricted stock that are not subject to
vesting based on performance goals. The maximum number of shares that may be
subject to awards granted to any individual participant is 500,000.
ELIGIBLE PERSONS. The Plan provides that any person who is employed by the
Company or a subsidiary or who provides consulting or other services to the
Company or a subsidiary is eligible to be a participant and receive awards
pursuant to the Plan.
ADMINISTRATION. The Plan is administered by a committee designated by the Board
of Directors. The Plan committee is required to be comprised of at least two
members, each of which must be a "non-employee director." The Plan committee has
exclusive power to:
- select eligible persons to participate in the Plan,
- determine the nature and extent of awards to be made to each participant,
- determine the time when awards will be made to eligible persons,
16
20
- determine the duration of restricted periods and performance award
periods,
- determine the conditions to which payment of awards may be subject,
- establish performance goals for each award period, and
- prescribe the form of agreement to be entered into between the eligible
person and the Company with respect to the award.
In addition, the Plan committee has the authority to establish and revise all
rules and regulations relating to the Plan and to make determinations with
respect to the Plan that it considers to be necessary or advisable for the
administration of the Plan.
AMENDMENT AND TERMINATION. The Plan is scheduled to expire on January 31, 2005,
and may be terminated at any earlier time by the Board of Directors. In
addition, the Plan committee may at any time amend, suspend or reinstate the
Plan. Any amendment that materially increases the benefits available under the
Plan is contingent upon the approval of the stockholders of the Company.
CHANGE-IN-CONTROL. In the event a change-in-control event occurs with respect
to the Company, all awards made pursuant to the Plan will fully vest
immediately, and all options will be immediately exercisable, if the Plan
committee provides for such vesting and acceleration in the agreement between
the participant and the Company relating to the award. Change-in-control events
include the ownership by one person or entity of 25% or more of the Common
Stock, specified mergers or consolidations involving the Company and the
approval of a plan of liquidation or of a sale of all or substantially all of
the Company's assets.
RATIFICATION OF SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
ACCOUNTANTS (PROXY PROPOSAL 3)
The Board of Directors Recommends a Vote "For" This Proposal.
Although not required by the Certificate of Incorporation or By-Laws, it has
been the Company's practice for many years to have the stockholders act on a
proposal of the Board of Directors relating to the selection of independent
accountants. A representative of PricewaterhouseCoopers LLP is expected to be
present at the meeting and will have the opportunity to make a statement, if
desired, and to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The Board of Directors requests that any stockholder who wishes to recommend
nominees for directors submit names of such nominees in writing to the Secretary
of the Company at its address given above prior to December 1, 2000.
Stockholders wishing to submit proposals for inclusion in the Company's proxy
statement and form of proxy for the 2001 Annual Meeting of Stockholders must
submit proposals to the Company at such address by December 1, 2000.
Stockholders wishing to present proposals for a formal vote (other than
proposals included in the Company's proxy statement), or to nominate candidates
for election as directors at a meeting of the Company's stockholders, must do so
in accordance with the Company's By-Laws. In order to be presented at the 2001
Annual Meeting, the By-Laws provide that such stockholder proposals or
nominations may be made only by a stockholder of record who shall have given
notice of the proposed business or nomination to the Company between December
12, 2000 and January 12, 2001. The notice must contain, among other things, the
name and address of the stockholder, a brief description of the business desired
to be brought before the Annual Meeting, the reasons for conducting the business
at the Annual Meeting, and the stockholder's ownership of the Company's capital
stock. In the case of nominations, the notice should contain the background and
stock ownership information with respect to each nominee. Stockholders may
obtain a copy of the relevant provisions of the By-Laws by writing to the
Secretary of the Company at the address given above. Proposals received after
January 12, 2001 will not be considered "timely" under the federal proxy rules
for the purpose of determining whether the Company may use discretionary
authority to vote on any such proposals.
17
21
GENERAL
The cost of solicitation of proxies will be borne by the Company. Such
solicitation will be made by mail and may also be made by the Company's officers
and employees personally or by telephone, facsimile or telegram without
additional compensation. The Company may also reimburse brokers, dealers, banks,
voting trustees or their nominees for their reasonable expenses in sending
proxies, proxy material and annual reports to beneficial owners. The Company has
retained ChaseMellon Consulting Services, L.L.C., 450 West 33rd Street, New
York, New York 10001, to aid in the solicitation of proxies. ChaseMellon will
solicit proxies by personal interview, telephone, facsimile and mail, and may
request brokerage houses and other nominees and fiduciaries or custodians to
forward soliciting materials to beneficial owners of the Company's stock. For
these services, the Company will pay a fee of approximately $7,500, plus
expenses.
The Company had outstanding 18,613,327 shares of Common Stock as of February 16,
2000, each of which is entitled to one vote. Only holders of record at the close
of business on February 16, 2000 will be entitled to vote.
Under applicable Delaware law, abstentions and broker non-votes as to any
proposal will be treated as present at the meeting for purposes of determining a
quorum, but will not be counted as having been voted on the proposal and will
have no effect on the outcome of the vote thereon.
If a nominee for director should become unavailable for any reason, it is
intended that votes will be cast for a substitute nominee designated by the
Board of Directors. The Board of Directors has no reason to believe the persons
nominated will be unable to serve if elected. The Board of Directors does not
know of any matters to be presented for consideration at the meeting other than
the matters described in Proposals 1, 2 and 3 of the Notice of Annual Meeting.
However, if other matters are presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
judgment. All shares represented by the accompanying proxy, if the proxy is
given prior to the meeting, will be voted in the manner specified therein.
By order of the Board of Directors.
gates signature
Signe S. Gates
Secretary
March 15, 2000
18
22
ANNEX I
BARNES GROUP INC.
EMPLOYEE STOCK AND OWNERSHIP PROGRAM
EFFECTIVE FEBRUARY 1, 2000
1. PURPOSE
The purpose of the Plan is to provide a means through which the Company may
attract able persons to provide services to or enter and remain in the employ
with the Company and its Subsidiaries and to provide a means whereby they can
acquire and maintain Common Stock ownership, or be paid incentive compensation
measured by reference to the value of Common Stock, thereby strengthening their
commitment to the welfare of the Company and promoting an identity of interest
between stockholders of the Company and these service providers and employees.
So that the appropriate incentive can be provided, the Plan provides for
granting Incentive Stock Options, Nonqualified Stock Options, Restricted Stock
Awards, Performance Share or Cash Unit Awards, and SARs or any combination of
the foregoing.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.
(b) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Restricted Stock Award, Performance
Share or Cash Unit Award, or SAR under the Plan.
(c) "Award Agreement" means the agreement between the Company and a
Participant who has been granted an Award which defines the rights and
obligations of the parties with respect to such Award.
(d) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of
Performance Share or Cash Units has been earned.
(e) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(f) "Board" means the Board of Directors of the Company.
(g) "Change in Control" shall have the meaning set forth in Section 11(p).
(h) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
(i) "Committee" means the committee appointed by the Board to administer
the Plan as described in Section 4.
(j) "Common Stock" means the common stock of the Company.
(k) "Company" means Barnes Group Inc.
(l) "Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such
authorization.
(m) "Disability" means, with respect to Incentive Stock Options,
"permanent and total disability" as defined in Section 22(e)(3) of the
Code, and, for all other purposes shall have the meaning set forth in
the Company's long-term disability plan.
I-1
23
(n) "Eligible Person" means any person regularly employed by or providing
consulting or other services to the Company or a Subsidiary. An Award
other than an Incentive Stock Option may be granted to an Eligible
Person, in connection with hiring, retention or otherwise, prior to
the date the Eligible Person first performs services for the Company
or a Subsidiary, provided that such Award shall not become vested
prior to the date on which the Eligible Person completes one
continuous year of employment/service with the Company and/or
Subsidiaries.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(p) "Fair Market Value" on a given date means (i) if the Stock is listed
on a national securities exchange, the closing sale prices reported as
having occurred on the primary exchange on which the Stock is listed
and traded on the date prior to such date, or, if there is no such
sale on that date, then on the last preceding date on which such a
sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of The
Nasdaq Stock Market on a last sale basis, the average between the high
bid price and low ask price reported on the date prior to such date,
or, if there is no such sale on that date, then on the last preceding
date on which a sale was reported; or (iii) if the Stock is not listed
on a national securities exchange nor quoted in the National Market
System of The Nasdaq Stock Market on a last sale basis, the amount
determined by the Committee to be the fair market value based upon a
good faith attempt to value the Stock accurately.
(q) "Holder" means a Participant who has been granted an Award, or a
permitted transferee of such a Participant.
(r) "Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an
"incentive stock option" within the meaning of Section 422 of the
Code.
(s) "Nonqualified Stock Option" means an Option granted under the Plan
which is not designated as an Incentive Stock Option.
(t) "Normal Termination" means termination of employment or service with
the Company or a Subsidiary other than by reason of death or
Disability.
(u) "Option" means an Award granted under Section 7 of the Plan.
(v) "Option Period" means the period described in Section 7(c).
(w) "Option Price" means the exercise price set for an Option described in
Section 7(a).
(x) "Participant" means an Eligible Person who has been selected by the
Committee to participate in the Plan and to receive an Award pursuant
to Section 6.
(y) "Performance Goals" means the performance objectives established by
the Committee with respect to an Award Period, Restricted Period, or
Option Period with respect to Performance Share or Cash Units,
Restricted Stock, Options or SARs respectively, established for the
purpose of determining whether, and to what extent, such Awards will
be earned for an Award Period, Restricted Period or Option Period.
(z) "Performance Cash Unit" means a hypothetical equivalent to a number of
dollars established by the Committee and granted in connection with an
Award made under Section 8 of the Plan.
(aa) "Performance Share Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made
under Section 8 of the Plan.
(bb) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) any member of the
Barnes family (by blood or marriage) or any entity for the benefit of,
or controlled by, a member of the Barnes family (by blood or
marriage), (ii) the Company or a Subsidiary, (iii) a trustee or other
fiduciary holding securities under an employee benefit plan
I-2
24
of the Company or any of its Affiliates, (iv) an underwriter
temporarily holding securities pursuant to an offering of such
securities, or (v) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(cc) "Plan" means the Company's Employee Stock And Ownership Program, as
amended.
(dd) "Restricted Period" means, with respect to any share of Restricted
Stock, the period of time determined by the Committee during which
such Award is subject to the restrictions set forth in Section 9 of
the Plan.
(ee) "Restricted Stock" means shares of Stock issued or transferred to a
Participant subject to forfeiture and the other restrictions set forth
in Section 9 of the Plan.
(ff) "Restricted Stock Award" means an Award of Restricted Stock granted
under Section 9 of the Plan.
(gg) "SAR" means a stock appreciation right which entitles a Participant to
receive, in cash or Stock (valued at Fair Market Value), at the
discretion of the Committee, an amount equal to the excess of the Fair
Market Value of a specified number of shares of Stock at the time of
exercise over the Option Price established by the Committee.
(hh) "Securities Act" means the Securities Act of 1933, as amended.
(ii) "Stock" means the Common Stock of the Company or such other authorized
shares of stock of the Company as from time to time may be authorized
for use under the Plan.
(jj) "Subsidiary" means any corporation or other business entity in which
the Company owns a significant equity interest, as determined in the
discretion of the Committee.
3. EFFECTIVE DATE, DURATION AND STOCKHOLDER APPROVAL
The Plan is effective as of February 1, 2000. The validity of any and all Awards
granted pursuant to the Plan is contingent upon approval of the Plan by the
stockholders of the Company in a manner which complies with Section 422(b)(1) of
the Code and Section 162(m)(4)(C)(ii) of the Code.
The expiration date of the Plan, after which no Awards may be granted hereunder,
shall be January 31, 2005; provided, however, that the administration of the
Plan shall continue in effect until all matters relating to the payment of
Awards previously granted have been settled.
4. ADMINISTRATION
The Plan shall be administered by the Committee, which shall be composed of at
least two persons, each member of which, at the time he or she takes any action
with respect to an Award under the Plan, shall be a "Non-Employee Director", as
defined in Rule 16b-3 under the Exchange Act, or any successor rule or
regulation, and an "outside director", as defined in Treasury Regulations
sec. 1.162-27(e)(3), or any successor regulation. The majority of the members of
the Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present or acts approved in writing
by a majority of the Committee shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have exclusive power
to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards to be made to each
Participant;
(c) Determine the time or times when Awards will be made to Eligible
Persons;
(d) Determine the duration of each Award Period and Restricted Period;
(e) Determine the conditions to which the payment of Awards may be subject;
(f) Establish the Performance Goals, if any, for each Award Period;
I-3
25
(g) Prescribe the form of Award Agreement or other form or forms evidencing
Awards; and
(h) Cause records to be established in which there shall be entered, from
time to time as Awards are made to Eligible Persons, the date of each
Award, the number of Incentive Stock Options, Nonqualified Stock
Options, Performance Share or Cash Units, shares of Restricted Stock
and SARs awarded by the Committee to each Eligible Person, and the
expiration date and the duration of any applicable Award Period or
Restricted Period.
The Committee shall have the authority, subject to the provisions of the Plan,
to establish, adopt, or revise such rules and regulations and to make all such
determinations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. The Committee's interpretation of the Plan or
any documents evidencing Awards granted pursuant thereto and all decisions and
determinations by the Committee with respect to the Plan shall be final,
binding, and conclusive on all parties unless otherwise determined by the Board.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options, Restricted Stock,
Performance Share or Cash Units and/or SARs to one or more Eligible Persons;
provided, however, that:
(a) The aggregate number of shares of Stock that may be issued or
transferred pursuant to all Awards may not exceed 2,500,000, subject
to Section 12; provided, however, that no more than 25% of the
foregoing number of shares of Stock may be available for grant of
Restricted Stock that is not subject to vesting based on the
achievement of Performance Goals, and; provided, further, that the
maximum number of shares of Stock with respect to which Options or
SARs or other Awards may be granted during any calendar year to any
Eligible Person is 500,000.
(b) In the event any Option, Restricted Stock Award, Performance Share or
Cash Unit or SAR shall be surrendered, terminate, expire, or be
forfeited, the number of shares of Stock no longer subject thereto
shall thereupon be released and shall thereafter be available for new
Awards under the Plan. If the person exercising an Option pays the
purchase price of the shares subject to such Option by delivering
shares of Common Stock to the Company (either through actual delivery
or by attestation) in accordance with the provisions of paragraph 7(b)
below, or pays the withholding taxes due in connection with the grant,
exercise, vesting, distribution, or payment of any Award or the shares
subject thereto (including without limitation any withholding taxes due
as a result of an election made by an Eligible Person under Section
83(b) of the Code) by delivering shares of Common Stock to the Company
or having the Company withhold shares of Common Stock otherwise
issuable in connection with the Award in accordance with the provisions
of paragraph 11(d) below, the number of shares so delivered or withheld
shall be added back to the aggregate number of shares available for
issuance or transfer under the Plan so that the aggregate number of
shares that may be issued or transferred under the Plan pursuant to
paragraph 5(a) above shall have been charged only for the net number of
shares issued or transferred by the Company in connection with the
Award; provided, however, that none of the surrendered or withheld
shares shall be available for issuance under Incentive Stock Options.
(c) Stock delivered by the Company in settlement of Awards under the Plan
may be authorized and unissued Stock or Stock held in the treasury of
the Company or may be purchased on the open market or by private
purchase.
(d) The Committee may, in its sole discretion, require a Participant to pay
consideration for an Award in an amount and in a manner as the
Committee deems appropriate.
(e) The Committee may only grant Incentive Stock Options to Eligible
Persons who are employees of the Company or a subsidiary corporation
as defined in Section 424 of the Code.
I-4
26
6. ELIGIBILITY
Participation shall be limited to Eligible Persons selected by the Committee.
7. STOCK OPTIONS AND SARS
Subject to Section 5(e), the Committee is authorized to grant one or more
Incentive Stock Options, Nonqualified Stock Options or SARs to any Eligible
Person. Each Option or SAR so granted shall be subject to the following
conditions or to such other conditions as may be reflected in the applicable
Award Agreement.
(a) OPTION PRICE. The exercise price ("Option Price") per share of Stock
for each Option or SAR shall be set by the Committee at the time of
grant but shall not be less than the Fair Market Value of a share of
Stock at the Date of Grant or, other than with respect to Incentive
Stock Options, at a date subsequent to the Date of Grant as specified
in the Option Award Agreement.
(b) MANNER OF EXERCISE AND FORM OF PAYMENT. SARs which have become
exercisable may be exercised by delivery of written notice of exercise
to the Committee. Options which have become exercisable may be
exercised by delivery of written notice of exercise to the Committee
accompanied by payment of the Option Price. The Option Price shall be
payable either (i) by United States dollars in cash or by check, (ii)
at the discretion of the Committee, by either actual delivery of shares
or by attestation, through shares of Stock valued at the Fair Market
Value at the time the Option is exercised (provided that such Stock has
been held by the Participant for at least six months), or (iii) at the
discretion of the Committee, by any combination of (i) and (ii) above.
(c) OPTION PERIOD AND EXPIRATION. Options and SARs shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years,
as may be determined by the Committee (the "Option Period"); provided,
however, that notwithstanding any vesting dates set by the Committee,
the Committee may, in its sole discretion, accelerate the
exercisability of any Option or SAR, which acceleration shall not
affect the terms and conditions of any such Option or SAR other than
with respect to exercisability. If an Option or SAR is exercisable in
installments, such installments or portions thereof which become
exercisable shall remain exercisable until the Option or SAR expires.
Unless otherwise stated in the applicable Option Award Agreement, an
Incentive Stock Option shall expire earlier than the end of the Option
Period in the following circumstances:
(i) If prior to the end of the Option Period, the Participant shall
undergo a Normal Termination, the Incentive Stock Option shall
expire on the earlier of the last day of the Option Period or the
date that is 90 days after the date of such Normal Termination. In
such event, the Incentive Stock Option shall remain exercisable by
the Holder until its expiration, only to the extent the Option was
exercisable at the time of such Normal Termination.
(ii) If the Participant dies prior to the end of the Option Period and
while still in the employ of the Company or such Participant
becomes Disabled, the Incentive Stock Option shall expire on the
earlier of the last day of the Option Period or the first
anniversary of such date of death or Disability of the Participant.
In the event of death or Disability, the Incentive Stock Option
shall remain exercisable by the Participant or the Holder or
Holders to whom the Participant's rights under the Incentive Stock
Option pass by will or the applicable laws of descent and
distribution until its expiration, only to the extent the Incentive
Stock Option was exercisable by the Participant at the time of
death or Disability.
In granting any Nonqualified Stock Option or SAR, the Committee may
specify that such Nonqualified Stock Option shall be subject to the
restrictions set forth in Section 7(c)(i) or (ii) with respect to Incentive
Stock Options, or such other termination and cancellation provisions as the
Committee may determine; provided, however, that in the event a Participant
terminates service or employment due to death, Disability, retirement (as
defined in any qualified retirement plan
I-5
27
maintained by the Company), or, in the case of a non-employee director,
after attaining age 55, termination of the Option Period shall occur no
later than the fifth anniversary of such date of termination, and in the
event of any other termination, termination of the Option Period shall
occur no later than the third anniversary of such date of termination, and
provided further, that the extension of any Option Period beyond the limits
set forth in Section 7(c)(i) or (ii) herein with respect to Incentive Stock
Options shall be conditioned on the Participant executing a release of
claims and/or a covenant not to compete in a form approved by the
Committee.
(d) OTHER TERMS AND CONDITIONS. In addition, each Option or SAR granted
under the Plan shall be evidenced by an Award Agreement, which shall
contain such provisions as may be determined by the Committee and,
except as may be specifically stated otherwise in such Award Agreement,
which shall be subject to the following terms and conditions:
(i) Each Option or SAR issued pursuant to this Section 7 or portion
thereof that is exercisable shall be exercisable for the full
amount or for any part thereof.
(ii) Each share of Stock purchased through the exercise of an Option
issued pursuant to this Section 7 shall be paid for in full at the
time of the exercise. Each Option shall cease to be exercisable,
as to any share of Stock, when the Holder purchases the share or
when the Option expires.
(iii) Subject to Section 11(k), Options and SARs issued pursuant to this
Section 7 shall not be transferable by the Holder except by will
or the laws of descent and distribution and shall be exercisable
during the Holder's lifetime only by the Holder.
(iv) Each Option and SAR issued pursuant to this Section 7 shall vest
and become exercisable by the Holder in accordance with the vesting
schedule established by the Committee and set forth in the Award
Agreement; provided, however, that no Option or SAR shall be
exercisable prior to the date on which the Participant completes
one year of continuous service with the Company or a Subsidiary,
unless termination of service occurs due to death, Disability,
retirement (as defined in any qualified retirement plan maintained
by the Company), after a Change-in-Control, or, in the case of a
non-employee director, after attaining age 55.
(v) Each Award Agreement may contain a provision that, upon demand by
the Committee for such a representation, the Holder shall deliver
to the Committee at the time of any exercise of an Option issued
pursuant to this Section 7 a written representation that the shares
to be acquired upon such exercise are to be acquired for investment
and not for resale or with a view to the distribution thereof. Upon
such demand, delivery of such representation prior to the delivery
of any shares issued upon exercise of an Option issued pursuant to
this Section 7 shall be a condition precedent to the right of the
Holder to purchase any shares. In the event certificates for Stock
are delivered under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a legend
or legends to be placed on such certificates to make appropriate
reference to such representation and to restrict transfer in the
absence of compliance with applicable federal or state securities
laws.
(vi) Each Incentive Stock Option Award Agreement shall contain a
provision requiring the Holder to notify the Company in writing
immediately after the Holder makes a disqualifying disposition of
any Stock acquired pursuant to the exercise of such Incentive Stock
Option. A disqualifying disposition is any disposition (including
any sale) of such Stock before the later of (a) two years after the
Date of Grant of the Incentive Stock Option or (b) one year after
the date the Holder acquired the Stock by exercising the Incentive
Stock Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock
Option is granted to a Participant who owns stock representing more
than ten percent of the voting power of all classes of stock of the
Company or of a Subsidiary, the Option Period shall not exceed five
years from the Date of Grant of such
I-6
28
Option and the Option Price shall be at least 110 percent of the Fair
Market Value (on the Date of Grant) of the Stock subject to the
Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the
extent the aggregate Fair Market Value (determined as of the Date of
Grant) of Stock for which Incentive Stock Options are exercisable for
the first time by any Participant during any calendar year (under all
plans of the Company and its Subsidiaries) exceeds $100,000, such
excess Incentive Stock Options shall be treated as Nonqualified Stock
Options.
(g) CONVERSION OF INCENTIVE STOCK OPTIONS INTO NONQUALIFIED STOCK OPTIONS;
TERMINATION OF INCENTIVE STOCK OPTIONS. The Committee, at the written
request of any Holder, may in its discretion, take such actions as may
be necessary to convert such Holder's Incentive Stock Options (or any
installments or portions of installments thereof) that have not been
exercised on the date of conversion into Nonqualified Stock Options at
any time prior to the expiration of such Incentive Stock Options,
regardless of whether the Holder is an employee of the Company or a
Subsidiary at the time of such conversion. Such actions may include,
but not be limited to, extending the Option Period or reducing the
exercise price of the appropriate installments of such Incentive Stock
Options. At the time of such conversion, the Committee (with the
consent of the Holder) may impose such conditions on the exercise of
the resulting Nonqualified Stock Options as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to
give any Holder the right to have such Holder's Incentive Stock
Options converted into Nonqualified Stock Options, and no such
conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the Holder, may
also terminate any portion of any Incentive Stock Option that has not
been exercised at the time of such termination.
(h) SUBSTITUTION OF OPTIONS. The Committee may grant Options and/or SARs
in substitution for options or stock appreciation rights held for
stock in corporations acquired by the Company with terms in accordance
with the terms for such previous options, but with an appropriate
adjustment in the exercise price and number of shares subject to the
options in compliance with the requirements of Section 424 of the
Code.
8. PERFORMANCE SHARE OR CASH UNITS
(a) AWARD GRANTS. The Committee is authorized to establish performance programs
to be effective over designated Award Periods determined by the Committee. The
Committee may grant Awards of Performance Share or Cash Units to Eligible
Persons in accordance with such performance programs. Before or within 90 days
after the beginning of each Award Period, the Committee will establish written
Performance Goals based upon financial objectives for the Company for such Award
Period and a schedule relating the accomplishment of the Performance Goals to
the Awards to be earned by Participants. Performance Goals may include absolute
or relative growth in earnings per share or rate of return on stockholders'
equity or other measurement of corporate performance and may be determined on an
individual basis or by categories of Participants. The Committee shall determine
the number of Performance Share or Cash Units to be awarded, if any, to each
Eligible Person who is selected to receive such an Award.
(b) DETERMINATION OF AWARD. At the completion of a Performance Award Period, or
at other times as specified by the Committee, the Committee shall calculate the
number of shares of Stock or amount of cash earned with respect to each
Participant's Performance Share or Cash Unit Award by multiplying the number of
Performance Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) PAYMENT OF PERFORMANCE SHARE OR CASH UNIT AWARDS. Performance Share or Cash
Unit Awards shall be payable in that number of shares of Stock or that amount of
cash determined in accordance with Section 8(b); provided, however, that, at its
discretion, the Committee may make payment to any Participant of Performance
Share Units in the form of cash upon the specific request of such Participant.
I-7
29
The amount of any payment made in cash shall be based upon the Fair Market Value
of the Stock on the business day prior to payment. Payments of Performance Unit
Awards shall be made as soon as practicable after the completion of an Award
Period; provided, however, that if a Participant makes the election described
below, Performance Share or Cash Units (with any Cash Units being converted into
equivalent Performance Share Units) shall instead be credited to the
Participant's Performance Share Account. Such credit of Performance Shares to a
Participant's Performance Share Account shall be made as of the same date as
payment of the Award would have been made to the Participant had no prior
election been made.
(i) ELECTIONS.
Any election to have an Award or a portion of an Award credited to a
Performance Share Account shall be made on a written form provided by
the Company for such purpose and shall only be effective with respect
to Awards that may be made on and after the January 1 following the
Company's receipt of such form, provided that such form is received
by the December 24 prior to the applicable January 1. Any such
election shall be made only in increments of ten percent (10%) of the
Award (rounded to the nearest whole share) and shall be effective
only for Awards made during the year in which the election becomes
effective.
(ii) PERFORMANCE SHARE ACCOUNT.
The Company shall maintain on its books and records a Performance
Share Account to record its liability for future payments to the
Participant or his or her beneficiary pursuant to the Plan. However,
a Performance Share Account under the Plan shall constitute an
unfunded arrangement; the Company shall not be required to segregate
or earmark any of its assets for the benefit of the Participant or
his or her beneficiary, and the amount reflected in a Performance
Share Account shall be available for the Company's general corporate
purposes and shall be available to the Company's general creditors.
The amount reflected in a Performance Share Account shall not be
subject in any manner to anticipation, alienation, transfer or
assignment by the Participant or his or her beneficiary, and any
attempt to anticipate, alienate, transfer or assign the same shall be
void. Neither the Participant nor his or her beneficiary may assert
any right or claim against any specific assets of the Company in
respect of a Performance Share Account, and the Participant and his
or her beneficiary shall have only a contractual right against the
Company for the amount reflected in a Performance Share Account.
Notwithstanding the foregoing, in order to pay amounts which may
become due under the Plan in respect of a Participant's Performance
Share Account, the Company may establish a grantor trust (hereinafter
the "Trust") within the meaning of Section 671 of the Code. Some or
all of the assets of the Trust may be dedicated to providing benefits
to the Participants pursuant to the Plan, but, nevertheless, all
assets of the Trust shall at all times remain subject to the claims
of the Company's general creditors in the event of the Company's
bankruptcy or insolvency.
(iii) DIVIDEND EQUIVALENTS.
On every date on which a dividend or other distribution is paid with
respect to Common Stock, commencing with the first such payment date
after the date on which a Performance Share is credited to a
Participant's Performance Share Account and continuing until such
Performance Share is either forfeited or paid out, there shall be
credited to the Participant's Performance Share Account a Dividend
Equivalent in respect of such Performance Share. A Dividend
Equivalent shall mean, with respect to a whole Performance Share
credited to a Participant's Performance Share Account, a measure of
value equal to the fractional share of Common Stock that could be
purchased with the amount that would have been paid to the
Participant as a dividend or other distribution if the Participant
had owned a whole share of Common Stock in lieu of said whole
Performance Share, the date of such deemed purchase being the
dividend payment date. Dividend Equivalents are expressed in the form
of Performance Shares. Notwithstanding the foregoing, the Committee
may decide when granting a Performance Share
I-8
30
that Dividend Equivalents with respect to such Performance Share
shall be paid to a Participant as accrued, rather than credited to
the Participant's Performance Share Account.
(iv) PARTICIPANT NOT A STOCKHOLDER.
The Participant shall have no stockholder's rights with respect to any
shares of Common Stock in respect of which Performance Shares are
credited to his or her Performance Share Account.
(v) PAYMENTS IN RESPECT OF PERFORMANCE SHARES.
(1) Termination of Employment or Provision of Services: In the event of a
Participant's Normal Termination and without a payment date having been
specified as provided below, such Participant shall be entitled to receive
payment in respect of the entire amount then credited to his or her Performance
Share Account. Such payment shall be made in the form of the number of shares of
Common Stock equal to the number of whole Performance Shares then credited to
the Participant's Performance Share Account, with any fractional Performance
Share being paid in cash determined on the basis of the value of a corresponding
fractional share of Common Stock on the business day preceding the date of
payment. Said shares of Common Stock and any cash amount shall be transferred to
the Participant within sixty (60) days after the Participant's Normal
Termination.
(2) Election of Participant: Upon prior written election by a Participant, the
Participant shall be entitled to receive payment in respect of an Award of
Performance Shares, to the extent then vested, and any Dividend Equivalents
earned on such Award on the date or dates specified in such written election.
Such election must either be made as part of the election to have such Award of
Performance Shares credited to a Performance Share Account as provided above, or
at any time at least one year prior to the date on which such payment would
otherwise be made. Such payment shall be made in the form of the number of
shares of Common Stock equal to the number of whole Performance Shares,
including related Dividend Equivalents, then credited to the Participant's
Performance Share Account with respect to such Award, with any fractional
Performance Share being paid in cash determined on the basis of the value of a
corresponding fractional share of Common Stock on the business day preceding the
date of payment. The Participant's Performance Share Account thereafter shall be
reduced to reflect the foregoing payment. Nothing herein shall preclude separate
elections with respect to separate Awards.
(3) Disability or Death While Employed by or Providing Services to the
Company: Notwithstanding an election made pursuant to the preceding section, in
the event of a Participant's termination of employment or provision of services
for reasons of Disability or death, the Participant or his or her beneficiary,
as the case may be, shall be entitled to receive payment in respect of the
entire amount then credited to his or her Performance Share Account. Such
payment shall be made in the form of the number of shares of Common Stock equal
to the number of whole Performance Shares then credited to the Participant's
Performance Share Account, with any fractional Performance Share being paid in
cash determined on the basis of the value of a corresponding fractional share of
Common Stock on the business day preceding the date of payment. Said shares of
Common Stock and any cash amount shall be transferred to the Participant or his
or her beneficiary within sixty (60) days after the Company has been notified in
writing of the Disability or death of the Participant and has been provided with
any additional information, forms or other documents it may reasonably request.
(4) Hardship Payment: Notwithstanding an election made pursuant to the Plan or
the Participant's continued employment with or provision of services to the
Company, if the Committee, upon written petition of the Participant, determines,
in the Committee's sole discretion, that the Participant has suffered an
unforeseeable financial emergency, the Participant shall be entitled to receive,
as soon as practicable following such determination, payment sufficient to meet
the cash needs arising from the unforeseeable financial emergency, not in excess
of the number of whole Performance Shares then credited to the Participant's
Performance Share Account. Such payment shall be made, at the election of the
Participant, either (i) in the form of the number of whole shares of Common
Stock, the proceeds from the sale of which would be sufficient to meet the cash
needs arising from the unforeseeable financial emergency, not in excess of the
number of whole Performance Shares then credited to the Participant's
Performance Share Account; (ii) in cash equal to the value on the business day
preceding
I-9
31
the date of payment of the number of whole shares of Common Stock available for
payment under clause (i) of this sentence; or (iii) in any combination of the
methods of payment provided for in clauses (i) and (ii) of this sentence. In the
event of a hardship payment in respect of the Participant's entire Performance
Share Account, any fractional Performance Share shall be paid in cash determined
on the basis of the value of a corresponding fractional share of Common Stock on
the business day preceding the date of payment. For purposes of the foregoing,
an unforeseeable financial emergency is an unexpected need for cash arising from
an illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence. Cash needs arising from foreseeable events such as
generally the purchase of a house or educational expenses for children shall not
be considered to be the result of an unforeseeable financial emergency. Said
shares of Common Stock and any cash amount shall be transferred to the
Participant as soon as practicable after the Committee determines that the
Participant has suffered an unforeseeable financial emergency. The Participant's
Performance Share Account thereafter shall be reduced to reflect the foregoing
payment.
(5) Early Withdrawal: Notwithstanding an election made pursuant to the Plan or
the Participant's continued employment with or provision of services to the
Company, the Participant, upon written petition to the Committee at any time,
shall be entitled to receive payment in respect of all or any portion of the
amount then credited to his or her Performance Share Account, subject to a
forfeiture penalty of six percent (6%) of the amount of the payment requested by
the Participant. Such payment shall be made, at the election of the Participant,
either (i) in the form of the number of shares of Common Stock equal to the
number of whole Performance Shares requested by the Participant in the written
petition and then credited to the Participant's Performance Share Account; (ii)
in cash equal to the value on the business day preceding the date of payment of
the number of whole shares of Common Stock available for payment under clause
(i) of this sentence; or (iii) in any combination of the methods of payment
provided for in clauses (i) and (ii) of this sentence. In the event of an early
withdrawal in respect of the Participant's entire Performance Share Account, any
fractional Performance Share shall be paid in cash determined on the basis of
the value of a corresponding fractional share of Common Stock on the business
day preceding the date of payment. Said shares of Common Stock and any cash
amount shall be transferred to the Participant within sixty (60) days after the
Company has received the Participant's written petition. The Participant's
Performance Share Account thereafter shall be reduced to reflect the foregoing
payment and the six percent (6%) forfeiture penalty.
(d) ADJUSTMENT OF PERFORMANCE GOALS. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem appropriate,
to compensate for, or reflect, (i) extraordinary or non-recurring events
experienced during an Award Period by the Company or by any other corporation
whose performance is relevant to the determination of whether Performance Goals
have been attained; (ii) any significant changes that may have occurred during
such Award Period in applicable accounting rules or principles or changes in the
Company's method of accounting or in that of any other corporation whose
performance is relevant to the determination of whether an Award has been
earned; (iii) any significant changes that may have occurred during such Award
Period in tax laws or other laws or regulations that alter or affect the
computation of the measures of Performance Goals used for the calculation of
Awards; or (iv) any other factors which the Committee deems appropriate. The
Committee may exercise only negative discretion with respect to awards that are
intended to qualify as performance-based compensation under Section 162(m) of
the Code. Unless the Committee determines otherwise at any time prior to payment
of a Participant's award under the Plan for any year, extraordinary or
non-recurring events pursuant to Section 8(d)(i), significant changes in
accounting rules or changes in the Company's method of accounting pursuant to
Section 8(d)(ii), and changes in tax law or other laws or regulations pursuant
to Section 8(d)(iii) shall be automatically excluded or included in determining
the extent to which the Performance Goal has been achieved, whichever will
produce the higher award.
I-10
32
9. RESTRICTED STOCK AWARDS
(a) AWARD OF RESTRICTED STOCK.
(i) The Committee shall have the authority (1) to grant Restricted Stock
Awards, (2) to issue or transfer Restricted Stock to Eligible Persons,
and (3) to establish terms, conditions and restrictions applicable to
such Restricted Stock, including the Restricted Period, which may
differ with respect to each grantee, the time or times at which
Restricted Stock shall be granted or become vested and the number of
shares to be covered by each grant.
(ii) The Holder of a Restricted Stock Award shall execute and deliver to
the Company an Award Agreement with respect to the Restricted Stock
setting forth the restrictions applicable to such Restricted Stock.
If the Committee determines that the Restricted Stock shall be held
in escrow rather than delivered to the Holder pending the release of
the applicable restrictions, the Holder additionally shall execute
and deliver to the Company (1) an escrow agreement satisfactory to
the Committee and (2) the appropriate blank stock powers with respect
to the Restricted Stock covered by such agreements. If a Holder shall
fail to execute a Restricted Stock Award Agreement and, if
applicable, an escrow agreement and stock powers, the Award shall be
null and void. Subject to the restrictions set forth in Section 9(b),
the Holder shall generally have the rights and privileges of a
stockholder as to such Restricted Stock, including the right to vote
such Restricted Stock, and to receive dividends paid thereon.
(iii) Upon the Award of Restricted Stock, the Committee shall cause a Stock
certificate registered in the name of the Holder to be issued and, if
it so determines, deposited together with the Stock powers with an
escrow agent designated by the Committee. If an escrow arrangement is
used, the Committee shall cause the escrow agent to issue to the
Holder a receipt evidencing any Stock certificate held by it
registered in the name of the Holder.
(b) RESTRICTIONS.
(i) Restricted Stock awarded to a Participant shall be subject to the
following restrictions until the expiration of the Restricted Period,
and to such other terms and conditions as may be set forth in the
applicable Award Agreement: (1) if an escrow arrangement is used, the
Holder shall not be entitled to delivery of the Stock certificate; (2)
the shares shall be subject to the restrictions on transferability set
forth in the Award Agreement; and (3) the shares shall be subject to
forfeiture to the extent provided in Section 9(d) and the Award
Agreement and, to the extent such shares are forfeited, the Stock
certificates shall be returned to the Company, and all rights of the
Holder to such shares and as a stockholder shall terminate without
further obligation on the part of the Company.
(ii) The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock whenever it may determine that,
by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Restricted Stock Award,
such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock shall commence
on the Date of Grant and shall expire from time to time as to that part of the
Restricted Stock Award indicated in a schedule established by the Committee and
set forth in the written Award Agreement. The Restricted Period shall be at
least three years; provided, however, that it may be as short as one year if
vesting is based on achievement of Performance Goals.
(d) FORFEITURE PROVISIONS. Except to the extent determined by the Committee and
reflected in the underlying Award Agreement, in the event a Participant
terminates employment with or ceases to provide services to the Company during a
Restricted Period for any reason, that portion of the Award with respect to
which restrictions have not expired shall be completely forfeited to the
Company. Except as otherwise determined by the Committee, in the event of such a
forfeiture, the amount of an Award that would otherwise be payable shall be
reduced, but not below zero, by the amount of any dividends previously paid to
the Holder with respect to the forfeited Restricted Stock.
I-11
33
(e) DELIVERY OF RESTRICTED STOCK. Upon the expiration of the Restricted Period
with respect to any shares of Stock covered by a Restricted Stock Award, the
restrictions set forth in Section 9(b) and the Award Agreement shall be of no
further force or effect with respect to shares of Restricted Stock which have
not then been forfeited. If an escrow arrangement is used, upon such expiration,
the Company shall deliver to the Holder, or his or her beneficiary, without
charge, the Stock certificate evidencing the shares of Restricted Stock which
have not then been forfeited and with respect to which the Restricted Period has
expired (to the nearest full share) and any cash dividends or Stock dividends
credited to the Holder's account with respect to such Restricted Stock and the
interest thereon, if any.
(f) STOCK RESTRICTIONS. Each certificate representing Restricted Stock awarded
under the Plan shall bear the following legend until the end of the Restricted
Period with respect to such Stock:
"Transfer of this certificate and the shares represented hereby is
restricted pursuant to the terms of a Restricted Stock Agreement, dated as
of , between Barnes Group Inc. and . A copy of such
Agreement is on file at the offices of the Company."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
(g) DEFERRAL. Upon election by a Participant, a whole share of Restricted Stock
that would otherwise have been granted to the Participant shall instead be made
in the form of Performance Shares, and such Performance Shares shall be credited
to the Participant's Performance Share Account, subject to the provisions of
Section 8. Such credit of Performance Shares shall be made as of the same date
as Restricted Stock would have been awarded to the Participant had no prior
election been made. Any such election shall be made by December 24 prior to the
year in which the Award for which the election is made will be made, and shall
otherwise comply with the requirements for elections in Section 8(c). If an
event occurs which would have caused forfeiture of the Restricted Stock for
which an election pursuant to this paragraph is made, then the equivalent
Performance Shares, along with any related Dividend Equivalents, shall be
forfeited.
10. NON-COMPETITION PROVISIONS
In addition to such other conditions as may be established by the Committee, in
consideration of the granting of Awards under the terms of the Plan, the
Committee, in its discretion, may include non-competition provisions in the
applicable Award Agreement.
11. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in financing
the purchase of Stock upon the exercise of Options, provisions for the
forfeiture of or restrictions on resale or other disposition of shares of Stock
acquired under any Award, provisions giving the Company the right to repurchase
shares of Stock acquired under any Award in the event the Participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state tax withholding requirements. Any such
provisions shall be reflected in the applicable Award Agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically provided in
the Plan, no person shall be entitled to the privileges of stock ownership in
respect of shares of Stock which are subject to Awards hereunder until such
shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable laws,
rules, and regulations, and to such approvals by governmental agencies as may be
required. Notwithstanding any terms or conditions of any Award to the contrary,
the Company shall be under no obligation to offer to sell or to sell and shall
be prohibited from offering to sell or selling any shares of Stock pursuant to
an Award unless such shares have been properly registered for sale pursuant to
the Securities Act with the Securities and Exchange
I-12
34
Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms and
conditions of such exemption have been fully complied with. The Company shall be
under no obligation to register for sale under the Securities Act any of the
shares of Stock to be offered or sold under the Plan. If the shares of Stock
offered for sale or sold under the Plan are offered or sold pursuant to an
exemption from registration under the Securities Act, the Company may restrict
the transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
(d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan, the
Company or a Subsidiary, as appropriate, shall have the right to deduct from all
Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in
an amount necessary to satisfy all Federal, state or local taxes as required by
law to be withheld with respect to such Awards and, in the case of Awards paid
in Stock, the Holder may be required to pay to the Company prior to delivery of
such Stock, the amount of any such taxes which the Company is required to
withhold, if any, with respect to such Stock. The Company shall accept shares of
Stock of equivalent Fair Market Value in payment of such withholding tax
obligations if the Holder of the Award elects to make payment in such manner.
(e) CLAIM TO AWARDS AND EMPLOYMENT OR SERVICE RIGHTS. No employee or other
person shall have any claim or right to be granted an Award under the Plan or,
having been selected for the grant of an Award, to be selected for a grant of
any other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ or
service of the Company or any Subsidiary.
(f) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant may file with the
Committee a written designation of one or more persons as the beneficiary who
shall be entitled to receive the rights or amounts payable with respect to an
Award due under the Plan upon his or her death. A Participant may, from time to
time, revoke or change his or her beneficiary designation without the consent of
any prior beneficiary by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall it be effective as of a date prior to such receipt. If no
beneficiary designation is filed by the Participant, the beneficiary shall be
deemed to be his or her spouse or, if the Participant is unmarried at the time
of death, his or her estate.
(g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall find
that any person to whom any amount is payable under the Plan is unable to care
for his or her affairs because of illness or accident, or is a minor, or has
died, then any payment due to such person or his or her estate (unless a prior
claim therefor has been made by a duly appointed legal representative) may, if
the Committee so directs the Company, be paid to his or her spouse, child,
relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on behalf of such
person otherwise entitled to payment. Any such payment shall be a complete
discharge of the liability of the Committee and the Company therefor.
(h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by such
member or on such member's behalf in such member's capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
employee, officer or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan may be allocated or
delegated, against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim) arising out of any act or
omission to act in connection with the Plan unless arising out of such person's
own fraud or willful bad faith; provided, however, that approval of the Board
shall be required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of
I-13
35
Incorporation or By-Laws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.
(i) GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the internal laws of the State of Connecticut without regard to the
principles of conflicts of law thereof.
(j) FUNDING. No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Holders shall have
no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
(k) NONTRANSFERABILITY. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or transferred or
otherwise disposed of, mortgaged, pledged or encumbered except, in the event of
a Holder's death, to a designated beneficiary to the extent permitted by the
Plan, or in the absence of such designation, by will or the laws of descent and
distribution; provided, however, the Committee may, in its sole discretion,
allow in an Award Agreement for transfer of Awards other than Incentive Stock
Options to other persons or entities.
(l) RELIANCE ON REPORTS. Each member of the Committee and each member of the
Board shall be fully justified in relying, acting or failing to act, and shall
not be liable for having so relied, acted or failed to act in good faith, upon
any report made by the independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than such member.
(m) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement, profit
sharing, group insurance or other benefit plan of the Company except as
otherwise specifically provided in such other plan.
(n) EXPENSES. The expenses of administering the Plan shall be borne by the
Company.
(o) TITLES AND HEADINGS. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
(p) CHANGE-IN-CONTROL. Notwithstanding anything in the Plan to the contrary, in
the event of a "Change-in-Control", as defined below, all Awards made pursuant
to the Plan shall become fully vested immediately, and all Options shall be
immediately exercisable (provided that if the "Change-in-Control" occurs with
respect to a Subsidiary, only Awards and Options granted to employees of such
Subsidiary shall be affected), if the Committee so provides in an Award
Agreement, or if so provided in an employment, severance or other agreement of
an employee granted an Award. A "Change-in-Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the securities
beneficially owned by such Person any such securities acquired
directly from the Company or its Affiliates) representing 25% or more
of the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (1) of paragraph
(iii) below; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on
the date hereof, constitute the Board and any new director (other than
a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or
I-14
36
nomination for election by the Company's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors on the date hereof or
whose appointment, election or nomination for election was previously
so approved or recommended; or
(iii) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other
corporation, other than (1) a merger or consolidation which would
result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or a
Subsidiary, at least 60% of the combined voting power of the
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation,
or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its Affiliates) representing 25% or more of the
combined voting power of the Company's then outstanding securities;
or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by stockholders of
the Company in substantially the same proportions as their ownership
of the Company immediately prior to such sale.
12. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any Award Agreements shall be subject to
equitable adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Stock or other
consideration subject to such Awards (i) in the event of changes in the
outstanding Common Stock or in the capital structure of the Company by reason of
stock dividends, stock splits, reverse stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges, or other
relevant changes in capitalization occurring after the Date of Grant of any such
Award, (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or (iii) upon the occurrence of any other event which otherwise warrants
equitable adjustment because it interferes with the intended operation of the
Plan. In addition, in the event of any such corporate or other event, the
aggregate number of shares of Stock available under the Plan and the maximum
number of shares of Stock with respect to which any one person may be granted in
connection with Awards shall be appropriately adjusted by the Committee, whose
determination shall be conclusive.
Notwithstanding the above, in the event of any of the following:
(1) The Company is merged or consolidated with another corporation or
entity and, in connection therewith, consideration is received by
stockholders of the Company in a form other than stock or other equity
interests of the surviving entity;
(2) All or substantially all of the assets of the Company are acquired by
another person;
(3) The reorganization or liquidation of the Company; or
(4) The Company shall enter into a written agreement to undergo an event
described in clauses (1), (2) or (3) above,
I-15
37
then the Committee may, in its sole discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash, the value of such Awards based upon the price per
share of Stock received or to be received by other stockholders of the Company
in the event. The terms of this Section 12 may be varied by the Committee in any
particular Award Agreement.
13. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the Plan to
the stockholders of the Company for approval shall be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of stock
options otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
14. AMENDMENT AND TERMINATION
The Board may at any time terminate the Plan. The Committee may, at any time, or
from time to time, amend or suspend and, if suspended, reinstate, the Plan in
whole or in part; provided, that any such amendment of the Plan shall be
contingent on obtaining the approval of the stockholders of the Company if such
amendment would materially increase benefits available to Participants or the
Committee determines that such approval is necessary to comply with any
requirement of law, including the requirements for qualification of Incentive
Stock Options or the rules of any stock exchange, stock market or automated
quotation system on which the Company's equity securities are traded or quoted.
I-16
38
Barnes Group Inc.
Executive Office
123 Main Street
Post Office Box 489
Bristol, Connecticut 06011-0489 U.S.A.
[Barnes Group Logo]
39
2000 - BARNES GROUP INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 12, 2000 - 11:00 A.M.
COUNTRY CLUB OF FARMINGTON
860 FARMINGTON AVENUE, FARMINGTON, CT 06032
The undersigned stockholder(s) of Barnes Group Inc. hereby appoints Signe
S. Gates and Monique B. Marchetti, each with the power to appoint her
substitute, as the undersigned's proxies and attorneys-in-fact to vote all the
shares of Common Stock covered by this proxy at the Annual Meeting of
Stockholders on April 12, 2000, or at any adjournment thereof, upon the matters
set forth in the Notice of such meeting with all the powers the undersigned
would possess if personally present. Either person is individually authorized
to vote as specified on proposals 1, 2 and 3 and otherwise in her discretion.
THIS CARD ALSO PROVIDES CONFIDENTIAL VOTING INSTRUCTIONS FOR SHARES HELD IN
THE BARNES GROUP INC. GUARANTEED STOCK PLAN. If you are a participant and have
shares of Barnes Group Inc. Common Stock allocated to your account under this
plan, please read the following as to the voting of such shares, as well as
voting a proportionate share of the allocated stock in the plan and the
allocated stock for which no voting instructions are received.
Trustee's Authorization: The undersigned authorizes Fleet National Bank, as
Trustee of the Barnes Group Inc. Guaranteed Stock Plan, to vote all shares of
the Common Stock of the Company allocated to the undersigned's account under
such plan, as well as a proportionate share of the unallocated stock in the plan
and the allocated stock for which voting instructions are not timely received,
at the Annual Meeting of Stockholders or at any adjournment thereof, in
accordance with the instructions on the reverse side.
THIS PROXY/VOTING INSTRUCTION CARD IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE.
- FOLD AND DETACH HERE -
YOUR VOTE IS IMPORTANT!
For your convenience, you can now vote your shares in one of two ways:
1. VOTE BY TELEPHONE: If you are a resident of the U.S.A. or Canada and have a
Touch Tone telephone you can call the proxy tabulator, ChaseMellon
Shareholder Services, L.L.C., at their toll-free telephone number:
1-800-840-1208 and follow the instructions found on the reverse side of this
card on how to vote your shares. There will be no charge to you for the call.
If you are not a resident of the U.S.A. or Canada or do not have a Touch Tone
telephone, please vote by mailing your proxy (see instructions below). Please
note that voting by telephone rather than by mail will help to reduce the
Company's costs.
OR
2. VOTE BY MAIL: Mark, sign and date your proxy and return it promptly in the
enclosed envelope. Please sign exactly as name(s) appear on the reverse side.
If the shares are registered in the names of two or more persons, each should
sign. Executors, administrators, trustees, guardians, attorneys-in-fact,
general partners and other persons acting in a representative capacity should
add their complete titles. When a corporation gives the proxy, an authorized
officer should sign.
THANK YOU FOR VOTING
40
2000-BARNES GROUP INC.-PROXY
Please mark
your votes as /X/
indicated in
this example
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING
NOMINEES AND PROPOSALS:
1. ELECTION OF DIRECTORS FOR A FOR all nominees WITHHOLD
THREE-YEAR TERM listed to the left AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the left
(01) Thomas O. Barnes
(02) Gary G. Benanav and
(03) Robert W. Fiondella / / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- ------------------------------------------------
FOR AGAINST ABSTAIN
2. APPROVAL OF THE BARNES GROUP
INC. EMPLOYEE STOCK AND OWN-
ERSHIP PROGRAM: / / / / / /
3. RATIFICATION OF SELECTION OF
PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT ACCOUNTANTS: / / / / / /
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED IN
THE MANNER SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDERS(S). UNLESS OTHERWISE
DIRECTED, THIS PROXY SHALL BE VOTED FOR PROPOSALS 1, 2 AND 3.
I plan to attend the meeting / /
Signature Signature Date
---------------------- ---------------------- ---------
NOTE: PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH.
FOLD AND DETACH HERE IF VOTING BY MAIL
VOTE BY TELEPHONE
(RESIDENTS OF THE U.S.A. AND CANADA ONLY)
Your telephone vote authorizes the named proxies/trustee to vote your shares in
the same manner as if you had marked, signed and returned your proxy by mail. If
you vote by telephone, you do not need to mail your proxy. Voting by telephone
rather by mail will help reduce the Company's costs.
TO VOTE BY TELEPHONE (FOR TOUCH TONE TELEPHONES ONLY):
* Dial the following toll-free telephone number AT ANYTIME: 1-800-840-1208
The call goes directly to our proxy tabulator, ChaseMellon Shareholder
Services, L.L.C. and there is no charge to you.
* You will then be asked to enter a Control Number, which is located in the box
in the lower right hand corner of this form.
* OPTION 1: To vote as the Board of Directors recommends:
FOR ALL proposals: Press 1.
When you press 1, your vote will be confirmed and cast as you
directed. END OF CALL.
* OPTION 2: If you choose to vote on each proposal separately, press 0. You will
hear the following instructions:
PROPOSAL 1: Election of Directors
- To vote FOR ALL nominees, press 1;
- To WITHHOLD FOR ALL nominees, press 9;
- TO WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and follow the
instructions.
- If you press 0, enter the TWO-DIGIT NUMBER that precedes the
nominee(s)' name for whom you withhold your vote, then
press 0.
PROPOSAL 2: Approval of the Barnes Group Inc. Employee Stock And Ownership
Program:
- To vote FOR, press 1;
- To vote AGAINST, press 9;
- To ABSTAIN from voting, press 0.
PROPOSAL 3: Ratification of selection of PricewaterhouseCoopers LLP as
Independent Accountants
- To vote FOR, press 1;
- To vote AGAINST, press 9;
- To ABSTAIN from voting, press 0.
Your vote will be confirmed as cast as you directed. END OF CALL.
IF YOU VOTE BY TELEPHONE,
PLEASE DO NOT MAIL BACK YOUR PROXY.
THANK YOU FOR VOTING.
CALL, TOLL-FREE, ANYTIME
1-800-840-1208